Ammonia High-Temperature Fuel Cell with Heat Recovery Loop Achieves 60% Efficiency, Comparable to Natural Gas

     One of the main challenges of developing a hydrogen economy is hydrogen storage. Hydrogen is a reactive gas with small molecules. It is prone to both leak and react with other gases, liquids, and solids. Storing it for immediate use requires compressing it, which requires energy. Its volumetric energy density is much less than natural gas. Thus, it takes more space to store an equivalent amount of energy.

     Ammonia has advantages over hydrogen for storage. For one, it is a liquid, so it can be contained and transported much more easily. Ammonia is NH3 and can be converted to hydrogen when needed. Ammonia “…liquefies at just -40°F and is easier to transport. Yet, converting ammonia back into usable hydrogen requires temperatures above 572°F, adding a layer of complexity and energy demand.” There are, however, some challenges in storing and transporting ammonia related to its toxicity that must be considered.

 

     Below is a table comparing hydrogen and ammonia as storage media from a 2021 article about recent progress in ammonia fuel cells published in the Journal of Materials Chemistry A. Below that is a model of the process of ‘green ammonia’ as an energy source.

 

Ammonia Safety Issues

     There are, however, some challenges in storing and transporting ammonia related to its toxicity that must be considered. The paper noted above addresses some of ammonia’s safety issues:

“Ammonia can be dissolved in water to give a solution with a solubility limit of approximately 35 wt% that does not require any specialised storage equipment and can simply be stored in a glass bottle. Ammonia can be compressed into the liquid state at a pressure of 8 bar and temperature of 20 °C, which is much easier than that of hydrogen. It is deemed corrosive by nature, with the ability to cause dehydration, severe skin burns, frostbite and eye damage. On inhalation, ammonia can cause lung damage or respiratory failure at vapour concentrations of 1700 ppm and can also lead to fatality if inhaled at excessively high concentrations of 5000 ppm. The use of ammonia may therefore be monitored under safety regulations and the toxicity issue can be addressed with appropriate practice. Ammonia can be stored as a solid in metal–amine complexes such as copper, zinc and their alloys to alleviate the corrosive properties. It can also be stored in compounds such as urea, which is a non-toxic solid, to overcome the issue of toxicity associated with liquid and gaseous ammonia. Storing in the solid form also allows for ease of transportation and avoids leakage. These solids can then emit ammonia upon heating or exposure to a vacuum. Further to this, unlike that of hydrogen, the smell of ammonia is easily detected at concentrations as low as 1 ppm due to its sharp and irritating odour.”

 

 

The New Efficiency Breakthrough that Combines Ammonia Cracking with the Fuel Cell Reaction

     Researchers at Germany’s Fraunhofer Institute for Ceramic Technologies and Systems (IKTS) have achieved a breakthrough in converting ammonia to power more efficiently. This involves combining a high-temperature fuel cell with an ammonia cracker.

“In this setup, the cracker first splits ammonia into nitrogen and hydrogen at temperatures over 572°F. The hydrogen then flows into the adjacent fuel cell, where it undergoes a reaction to produce electricity, while nitrogen is safely released back into the atmosphere.”

     The excess heat from the reaction of burning hydrogen is recovered and used to maintain the high temperature required to “crack” the ammonia into H2 and N2. The captured heat can also be used to heat buildings.

“This integrated heat loop raises the system’s overall efficiency to 60%, putting it on par with conventional natural gas-based power generation methods.”

“The compact design of this ammonia-powered fuel cell could be particularly beneficial for industrial facilities, municipalities, and large vessels like ships. These settings often lack space for bulky hydrogen storage but require robust energy solutions. With its high energy density and easier transport, ammonia may serve as an ideal energy source for both stationary and mobile applications. “Ammonia provides a stable, high-density form of hydrogen, making it a great candidate for clean power and heat generation,” Nousch noted, highlighting its potential for various climate-friendly applications.”

     The key to the breakthrough is attaining 60% efficiency of the entire process, which makes it more competitive with natural gas. Ammonia is promising as an energy carrier and fuel cell material. It is thought to be especially promising for marine propulsion since it requires less space than hydrogen of equivalent energy. Perhaps I will write a future post on the different types of ammonia fuel cells and some of their niche applications.

 

 

References:

 

Revolutionizing Clean Energy: New Fuel Cell System Powers Electricity Directly from Ammonia. Sadie Watkins. Ever-Growing USA. December 22, 2024. Revolutionizing Clean Energy: New Fuel Cell System Powers Electricity Directly from Ammonia

Recent progress in ammonia fuel cells and their potential applications   Check for updates. Georgina Jeerh, Mengfei Zhang, and  Shanwen Tao. Journal of Materials Chemistry A. Issue 2, 2021. Recent progress in ammonia fuel cells and their potential applications - Journal of Materials Chemistry A (RSC Publishing)

New York State’s Probably Ill-Fated Attempt to Make Fossil Energy Providers Pay

     New York Governor Kathy Hochul just signed legislation known as the Supefund Act that requires fossil energy providers to pay fees for climate impacts, in order for the state to pay for climate adaptation. I have noted previously the state’s backward priorities: putting decarbonization of the energy sector ahead of adaptation to extreme weather. Now, the plan is to make fossil energy providers pay for climate impacts. Newsweek reports:

“Under the new law, companies with significant greenhouse gas emissions will be required to contribute to a state fund dedicated to infrastructure projects aimed at mitigating future climate change damage and repairing existing impacts.”

     If they succeed in making the suppliers pay, the demanders will pay soon enough and prices would likely go up for consumers one way or another, it would seem.

"This landmark legislation shifts the cost of climate adaptation from everyday New Yorkers to the fossil fuel companies most responsible for the pollution. By creating a Climate Change Adaptation Cost Recovery Program, this law ensures that these companies contribute to the funding of critical infrastructure investments, such as coastal protection and flood mitigation systems, to enhance the climate resilience of communities across the state," Hochul's office said in a statement.

     The American Petroleum Institute pushed back immediately on the legislation:

"This type of legislation represents nothing more than a punitive new fee on American energy, and we are evaluating our options moving forward."

     According to Newsweek:

“The law will not impose immediate penalties on companies. Instead, the state must first establish regulations to identify liable parties, notify them of the fines and develop a system for allocating funds to infrastructure projects. Legal challenges to the legislation are anticipated.”

     It is highly unlikely that large international companies would pay the fees. One might ask why one state would require such fees and others not require them. I have always said that support for lower carbon energy should be provided directly to clean energy providers rather than by trying to punish fossil energy providers. I would guess that this legislation will have significant trouble moving forward and will not be seen as fair.

     The law hopes to land $75 billion with hundreds of millions from many individual companies for their emissions from 2000-2018. Yeah, good luck with that. According to the New York Post:

“The 38 companies identified as carbon polluters include American petro giants such as Exxon and Chevron as well as Shell and BP in the UK, Total Energies IES in France, Petrobras in Brazil, BHP in Australia, Glencore in Switzerland, Equinor in Norway and ENI in Italy.”

     Environmental advocates like Sierra Club like the law but others wonder whether it will survive legal challenges and note the unlikelihood of companies paying, especially international ones.

“This legislation is bad public policy that raises significant implementation questions and constitutional concerns. Moreover, its $75 billion price tag will result in unintended consequences and increased costs for households and businesses,” the letter, co-signed by the Business Council, the American Petroleum Institute Northeast Region and National Fuel Gas Company, among others.

     Another thing that makes the law unfair is that GHG emissions are just one factor among many that are leading to climate impacts. Sea level rise has been occurring since the last glacial maximum began to retreat. That natural sea level rise is responsible for the vast majority of climate impacts from storms and tides. There may be some acceleration due to global warming, but it is difficult to measure. Other impacts from storms are only partially due to global warming and in many cases that influence may be negligible. The fact is that a huge percentage of those climate impacts would have occurred whether fossil fuels were used or not.

 According to an article about the legislation in Reason, there are several reasons to suspect that the law will not stand:

“The law does not merely set a rate at which future carbon dioxide emissions will be taxed. It applies retroactively, "based on the fossil fuel companies' historic contribution to the buildup of greenhouse gases that is largely responsible for climate change." State legislatures have the power to pass taxes, but the Constitution says in no uncertain terms that they may not pass ex post facto laws that penalize firms or individuals for behavior that was not legally restricted at the time.”

     The reserves 35% of funding for disadvantaged communities, which are not well-defined in the state. The fees are essentially an extreme corporate tax applied only to a small group of companies.

“The law vaguely gestures at the figure of "several hundred billion dollars" in climate adaptation investments it will make through 2050. "Several," at a minimum, means "three," meaning $300 billion over 25 years; that would amount to $12 billion per year. If 100 percent of this $12 billion is incurred from anthropogenic climate change, a global phenomenon, then the assessment of the fossil fuel industry should be proportional to its yearly contribution to global emissions. It's not: There were 37.4 billion tons of energy-related carbon dioxide emissions in 2023, and the U.S. was responsible for 12.8 percent (4.8 billion tons), which would come to a tax of no more than $1.54 billion per year.”

     The article in Reason also disputes the amount of profit attributed to the three companies with the highest liabilities: ExxonMobil, Chevron, and ConocoPhillips. As detailed below, what happened when Washington state launched a cap-and-trade program is likely to happen in New York as well, with taxpayers footing the bill.

“Regardless of their profitability, the cost of New York's Superfund assessment won't fall solely on fossil fuel firms; it will be passed on to consumers in the form of higher energy prices. This is exactly what happened in Washington state after it launched a cap-and-trade program: BP added a 56-cent-per-gallon "Cap at the Rack" charge for diesel fuel to compensate for the $56.01 allowance per metric ton of carbon dioxide. Increasing the cost of doing business for fossil fuel firms will not result in a reduced "burden borne by…taxpayers for climate adaptation," as the bill claims; it will lead to higher costs for home heating and at the gas pump.”

 

References:

 

NY Governor Signs Law That Charges Companies for Greenhouse Gas Emissions. Matthew Impelli. Newsweek. December 26, 2024. NY Governor Signs Law That Charges Companies for Greenhouse Gas Emissions

Hochul signs NY law that will charge $75B to oil, gas and coal companies for climate change — but critics say customers will pick up tab. Carl Campanile. New York Post. December 26, 2024. Hochul signs NY law that will charge $75B to oil, gas and coal companies for climate change — but critics say customers will pick up tab

New York's Climate 'Superfund' Is Costly, Arbitrary, and Unconstitutional. Jack Nicastro. Reason. December 30, 2024. New York's Climate 'Superfund' Is Costly, Arbitrary, and Unconstitutional

Upper Devonian Burket/Geneseo Shale Geology, Drilling, and Production in the Appalachian Basin: A Supergiant Field Waiting to Be Fully Developed

     I have direct experience with this formation, having mapped it in the subsurface over a large area early in the play and having geosteered approximately 15% of the horizontal wells drilled in the formation.

     The Burket or Geneseo is the basal black organic shale member of the Upper Devonian Genessee Formation. The main ‘hot gamma ray’ organic rich shale member is the productive interval. The main productive interval is generally thin. Where we drilled it near the Western margin of the play it was generally 10-15 ft thick. Some general stratigraphy is shown below.

     In 2015 Gregory Wrightstone did some good analysis of the state of the play at the time. That analysis should probably be updated since there are now many more wells drilled in the formation and production histories are being developed. I know from a few companies’ investor presentations that the high reserves predicted in the play seem to still be valid. It is also thought that since there is a very clear ‘frac barrier’ directly below the formation, the Tully Limestone, and fracs tend to propagate upward rather than downward when they go out of formation, that gas from formations above the Burket/Geneseo is likely also producing gas in those wells. This includes some other hot shale members of the Genesee Formation, the Middlesex Shale hot zone, and possibly even the Rhinestreet Formation, where it is within a few hundred feet. Wrightstone noted at the time six-month cumulative production from the wells in the northeast (524 MMCF) vs. those in the southwest (685 MMCF) and those in the southwest core of the core (746 MMCF). Much of the southwest part of the Geneseo/Burket accumulation occurs in the wet gas window where NGLs such as ethane, propane, butanes, pentanes, and some condensate are also produced. Several slides from Wrightstone's work are shown below.

     A 2022 study in Marine and Petroleum Geology characterized the sequence stratigraphy of the Geneseo Formation in New York, dividing it into two sequences and three lithostratigraphic units:

“The Geneseo Formation herein has been subdivided into two depositional sequences comprising three lithostratigraphic units (i.e., Lower Geneseo, Fir Tree, and Upper Geneseo members respectively). The Lower and Upper Geneseo members show systematic aggradational to progradational parasequence stacking patterns, as well as downlap‒onlap stratal terminations with underlying strata; these members represent highstand systems tracts. The Fir Tree Member occurs between the Lower and Upper Geneseo members, truncates the underlying Lower Geneseo, shows progradational‒aggradational‒retrogradational parasequence stacking patterns, and spans two systems tracts: lowstand and transgressive.”

     It is the basal, or Lower Geneseo member that is the horizontal drilling target. The study also noted the key characteristics of a hydrocarbon reservoir, which the Geneseo obviously has:

“Key controls on unconventional reservoir quality and distribution in fine-grained, mudstone-dominated successions include total organic carbon (TOC), organic matter type (e.g., Type I-II liquid prone, Mixed Type II/III, or type III gas prone), mineralogy (i.e., clay content/ductility, brittleness, “fracability”), presence and distribution of high-strength rocks (i.e., fracture barriers/baffles), thermal maturity (0.8–1.3 for liquids-rich play), porosity/permeability, presence and distribution of natural fractures, and thickness of pay interval (Bohacs et al., 2005, 2012; Gale et al., 2014; Passey et al., 2010; Wilson and Schieber, 2016; Wilson et al., 2020; Katz et al., 2021; Venieri et al., 2021).”

     The potential of this black shale for hydrocarbon production was recognized as early as 1892 as noted in the Pennsylvania Geological Survey’s 2017 source-rock evaluation study of Upper Devonian rocks:

“The black Geneseo Shale Member of the Genesee Formation extends from western Pennsylvania to the north-central area of the state. Lesley (1892, p. 1,323) observed, “In New York and in other states it is a black laminated mud formation, with wall-like outcrops; but where its surfaces are exposed it weathers into loose leaves; often iron-stained on account of the abundance of iron pyrites; but usually deep black.” Carbonate concretions were also recognized as discriminating features then as they are today, with pyrite found in the cavities of the concretions. Lesley (1892, p. 1,334) was obviously a visionary when he foretold “and in future times when the petroleum production has been exhausted and our cities must again be lighted by artificial coal shale gas by Young’s process this ‘black shale’ formation will yield an infinite supply.”

     The depositional history of the Genessee Formation is in an epicontinental sea to the west of what would later become the Catskill Delta. The region of black shale deposition of the Geneseo/Burket member is shown below.

     Gary Lash at SUNY Fredonia noted that the Geneseo onlaps onto the underlying erosional surface of the Tully limestone. He also noted that by Geneseo time the basin forebulge had migrated to the west.

     Spencer Leonard Williams Jr. in his 2022 Master’s Thesis described the depositional history of the Geneseo based on a core analysis from Westmoreland County, Pennsylvania as follows:

“Genesee sediments have been interpreted as deposited in the deeper part of an epicontinental sea west of the Late Devonian Catskill Delta. The interpretation is that a euxinic environment occurred in the deeper part of the sea and the upper waters of the sea were relatively clear with high oxygen levels.   During this time, depositional energy was low and only fine-grained sediments accumulated in the calm waters.”

     The contact between the basal Geneseo member and the Tully Limestone is considered to be an unconformity in some places but is generally considered to be a hiatus that extends through much of its depositional basin. Williams also concluded that the mineralogy of the Burket/Geneseo is similar to that of the Marcellus Shale.

“Both units are composed mainly of quartz and clay mixture with scattered intervals of higher carbonate content.  Average total organic carbon (TOC) approaches 4 weight percent in both shale units.  However, the Marcellus Shale has a significantly higher TOC, approaching 12 weight percent at its base, than the Geneseo-Burket.”

He also noted that the depositional sequences of the Marcellus and Burket-Geneseo are similar as are the mechanical properties and the presence of carbonate units above the main basal hot zone.

     A core analysis of both the Geneseo/Burket and the Marcellus in Doddridge County, West Virginia published in 2017 by Randy Blood, Gary Lash, and Ashley Douds, utilized pyrite morphology as pyrite framboid size analysis and chemostratigraphy to predict oxygenation conditions during deposition.

“These observations suggest that while the Geneseo Shale accumulated under occasionally anoxic conditions, the unit also experienced more frequent and likely more robust oxygenation events as compared to the underlying Marcellus, a model consistent with the less robust enrichments of both U and Mo (Fig. 15).  This interpretation is slightly at odds with the framboid size analysis of the Geneseo Shale of New York State of Formolo and Lyons (2007). Although MFDs were not presented in this study, a mean diameter of 4.9 µm would indicate more dominantly euxinic conditions in this part of the basin (Formolo and Lyons, 2007). This, perhaps unsurprisingly, provides evidence for variations in redox conditions across the basin of roughly time-equivalent strata.”

     They also noted that importance of understanding these redox conditions for assessing the hydrocarbon productive aspects of the rocks.

“An understanding of the litho- and stratigraphic framework provides geologic context in which to interpret changes in sediment flux and redox conditions through time and across a basin. While at first these aspects do not seem related to hydrocarbon production, they ultimately control the quality and distribution of organic matter and therefore the location of hydrocarbon producing strata and unconventional reservoirs.”

     Below is a sequence stratigraphy chart of the Burket/Geneseo through Marcellus interval and an explanation of pyrite framboid sie analysis used to define redox conditions. 

     Where the Burket/Geneseo is close to the underlying Marcellus as in the Southwest producing area, it is advisable to hydraulically fracture both formations simultaneously so that the pre-existing induced fractures in the Marcellus that propagate upward don’t bleed off frac pressure when the Geneseo is hydraulically fractured, resulting in an ineffective frac. This may have affected some of the early Burket/Geneseo production. A 2018 AAPG study published by Kimberly Ayers. Henry Jacot, and Alivia Ayers utilized bottomhole pressure gauges to study “frac hits” from three child Marcellus wells and two Burket wells to a Marcellus parent well that had been producing for nine months. They found that 75% of the Marcellus frac stages were registered as hits in the parent well. Unfortunately, there was no information in the abstract about frac hits from the Burket child wells.

     The EIA added the Burket-Geneseo to its shale gas production database in 2019, showing that it was nearing 1 BCF/day of production, as shown below.

 

     Nine years have gone by since Wrightstone’s work. Since then, the play has not grown very fast. This is likely due to the Marcellus still being slightly better in most areas and the play being produced in its 'core of the core' area along with Marcellus in staggered laterals. According to the Appalachian Basin Horizontal Well Database, there are just 281 horizontal wells drilled in the Burket/Geneseo. Many of these are early test wells that were short laterals. Longer laterals beqan to be drilled in 2019 but have been shortened since 2021. This is likely due mainly to acreage constraints. Cumulative production is at about 1.2TCF as of September 2024. That is less than 1% of predicted reserves. That is an average of 4.3 BCF per well so far produced. Most of the wells were drilled between 2013 and 2019. Since 2019 the well count has been down. The reasons for the lower well count likely have to do mostly with low natural gas prices. The 1.2 TCF produced is about 4% of Wrightstone’s 30TCF threshold for a “supergiant” field. There is little doubt that the Burket/Geneseo can reach that amount of production if it were to be developed. Of the 281 producing wells, 248 of them are in Pennsylvania, and the rest in West Virginia. The slides below are from that database.

     When I mapped the Middle and Upper Devonian intervals in the Appalachian Basin, I noticed that along the western margin of the basin of the time the Hamilton Shale thinned and pinched out to zero along the Ohio border, and the Tully Limestone even disappeared which resulted in a few cases where the Burket sat right on top of the Marcellus, looking as if they were a single hot shale formation. At least that is how I interpreted a well we drilled in Belmont County, Ohio around 2006.

     Wrightstone noted in a 2015 article in Hart Energy:

“As with the Marcellus, structural complexity is a key negative to production performance and complicates geosteering. Additionally, since the Burket/Geneseo is significantly thinner than the Marcellus, additional geosteering challenges are presented to the operator to stay in the sweet zone of high TOC, and rotary steerable drilling may be the optimal solution.”

     Where I geosteered wells in the play along its western margin the geology was fairly flat without any significant folding. These wells were generally easy to steer and drilled fast, a few exceeding 7000 ft of horizontal drilling in 24 hours. Even with the thin reservoir they were easy to steer due to the lack of structure and the clear upper and especially lower boundary (Tully Limestone) of the formation. We did utilize rotary steerable drilling successfully, but previous to that we still did not have any trouble staying in zone in our non-structural area.

     The USGS upped its reserves for Appalachian shale reservoirs in 2019 but that is still likely a severe undercount. They assessed the Burket/Geneseo as a minor part of Marcellus reserves. They assessed the total Marcellus reserves as follows: “96.5 trillion cubic feet of undiscovered, technically recoverable continuous (or unconventional) resources of natural gas.” The AAPG estimates are similar, but the EIA estimates are higher. I am inclined to go with the highest estimates. A January 2024 paper in the APPG addresses the wide variation in Marcellus reserve predictions:

“A study by the Bureau of Economic Geology (BEG) at The University of Texas at Austin (Ikonnikova et al., 2018), predicted the technically recoverable resources (TRRs) of the Marcellus to be 560 TSCF. The US Department of Energy’s Energy Information Administration (EIA) recently published a prediction of 310.6 TSCF of technically recoverable gas (Energy Information Administration, 2020a). Lastly, the US Geological Survey (USGS) estimated only 96.5 TSCF of total undiscovered resources in the Marcellus. This divergence of total producible resource predictions in the Marcellus shows just how difficult and uncertain the resource assessment in unconventional reservoirs is.”

     As indicated below in Gas-In-Place maps from Range Resources, the inaccessible natural gas reserves under the city of Pittsburgh and its metropolitan area in Allegheny County, which include Utica, Marcellus, and Burket/Geneseo, are immense, easily exceeding the reserves of whole countries or regions.

 

References:

 

Appalachian Basin Horizontal Well Database. Monthly Overview. September 2024. Ayers Petroleum Consultants. (subscription). November 4, 2024. Home - App Basin Database

Upper Devonian Drilling. Nuttall Legal, LLC. West Virginia Oil and Gas Lawyer. Blog. May 2015- July 2016. Burket Formation | Nuttall Legal, LLC

Burket/Geneseo Shale: Appalachia’s little brother to the Marcellus & Utica. Gregory Wrightstone. Presented at: Pittsburgh Association of Petroleum Geologists. Pittsburgh, Pennsylvania. October 8, 2015. PAPGWrightstone20151008.pdf

Source rock evaluation of the Upper Devonian Genesee, Harrell, and West Falls Formations in Pennsylvania. Schmid, K. W., and Markowski, A. K. 2017. Pennsylvania Geological Survey. Mineral Resources Report 102. M102_text.pdf

Regional Correlation and Depositional History using Well Log and Core Data of the Geneseo-Burket from the Poseidon 8M Well, Westmoreland County PA, USA. Spencer Leonard Williams Jr. Masters Thesis. West Virginia University. Regional Correlation and Depositional History using Well Log and Core Data of the Geneseo-Burket from the Poseidon 8M Well, Westmoreland County PA, USA

Marcellus Assessment: USGS Ups Appalachian Gas Estimate. American Oil & Gas Reporter. November 2019. USGS Ups Appalachian Gas Estimate

Influence of Basin Dynamics on Upper Devonian Black Shale Deposition, Western New York State and Northwest Pennsylvania. Gary G. Lash. AAPG Search and Discovery Article #30050. April 22, 2007. Influence of Basin Dynamics on Upper Devonian Black Shale Deposition, Western New York State and Northwest Pennsylvania, By Gary G. Lash , #00000 (2007).

Sequence stratigraphic reconstruction of the late Middle Devonian Geneseo Formation of NY, USA: Developing a genetic model for “Upper Devonian” unconventional targets in the Northern Appalachian Basin. Ryan D. Wilson, Juergen Schieber, and Kevin M. Bohacs. Marine and Petroleum Geology. Volume 138, April 2022, 105547. Sequence stratigraphic reconstruction of the late Middle Devonian Geneseo Formation of NY, USA: Developing a genetic model for “Upper Devonian” unconventional targets in the Northern Appalachian Basin - ScienceDirect

Sedimentary Facies and Depositional Environment of the Middle Devonian Geneseo Formation of New York, U.S.A. November 2015. Journal of Sedimentary Research 85(11):1393-1415. Ryan D. Wilson and Juergen Schieber. (PDF) Sedimentary Facies and Depositional Environment of the Middle Devonian Geneseo Formation of New York, U.S.A.

Physical Stratigraphy of the Genesee Formation (Devonian) in Western and Central New York. WALLACE de WITT, JR., and G. VV. COLTON.  GEOLOGICAL SURVEY PROFESSIONAL PAPER 1032-A. 1978. report.pdf

Refined Lithostratigraphy of Upper and Middle Devonian Shales in West Virginia. Ray Boswell and Susan Pool. AAPG Search and Discovery Article #30607. June 10, 2019. ndx_boswell.pdf

THE MIDDLE DEVONIAN MARCELLUS AND GENESEO SHALES REPRESENTED BY THE EQT J. LEESON #1 CORE, DODDRIDGE COUNTY, WEST VIRGINIA, USA: INSIGHTS INTO DEPOSITIONAL ENVIRONMENT AND RESERVOIR ARCHITECTURE. David R. Blood. Ashley S.B. Douds, and Gary G. Lash. Conference Paper. 2017. THEMIDDLEDEVONIANMARCELLUSANDGENESEOSHALESREPRESENTEDBYTHEEQTJLESSONCORE (1).pdf

Statistical Analysis of Generational Effect on Marcellus Well Completions Using Bottomhole Gauge Data. Kimberly Ayers; Henry Jacot; Alivia Ayers. Paper presented at the SPE/AAPG Eastern Regional Meeting, Pittsburgh, Pennsylvania, USA, October 2018. Paper Number: SPE-191785-18ERM-MS. Statistical Analysis of Generational Effect on Marcellus Well Completions Using Bottomhole Gauge Data | SPE Eastern Regional Meeting | OnePetro

America’s Natural Gas Juggernaut. Gregory Wrightstone. Real Clear Energy. April 11, 2022. America’s Natural Gas Juggernaut | RealClearEnergy

Forecast of economic gas production in the Marcellus Shale. Wardana Saputra; Wissem Kirati; David Hughes; Tadeusz W. Patzek. AAPG Bulletin (2024) 108 (1). Forecast of economic gas production in the Marcellus Shale | AAPG Bulletin | GeoScienceWorld

Little Brother To The Utica And Marcellus:The Upper Devonian Burket/Geneseo Shale holds yet more Appalachian riches. Gregory Wrightstone. Hart Energy. July 1, 2015. Little Brother To The Utica And Marcellus | Hart Energy

Allegheny County: A Challenged Gas Super-Giant. Gregory Wrightstone and Justin Skaggs. Oil & Gas Investor. December 2016. Allegheny_County__A_Challenged_Natural_Gas_Super-Giant_Final.pdf

Milei: Libertarian Reforms, Increased Poverty, and Argentina’s New Economic Tool, Nequin Basin Oil & Gas

    After a year in power, we can now ask if Argentina President Javier Milei’s reforms are working. Well, I would say that depends on who one asks. Economics metrics show that the economy has indeed improved. The inflation rate has dropped by half, and the rental housing crunch has gotten better as there is more available housing at lower prices. Economic growth has returned and there is now a budget surplus. However, as the Washington Examiner article notes that is not the whole picture, as is often the case with economic reform. The poverty rate has risen. Argentina is one of the only countries that has struggled with its economy in the past decades as most other countries have improved. Clearly, there was a need for economic reform. Argentina’s residents are 13% poorer than they were in 1980, according to HumanProgress’s Marian Tupy.

     Milei has eliminated government agencies, cut wages, and made the government smaller. He has drastically cut government spending. His efforts are a model for Trump and DOGE.  However, unlike Trump’s plans, or rather threats, he has slashed tariffs. He has not adopted the U.S. dollar, which was widely expected but has made all currencies legal tender in the country. Milei calls himself an anarcho-capitalist.

“As the Economist put it: "Argentina’s president is often wrongly lumped in with populist leaders such as Donald Trump, the hard right in France and Germany or Viktor Orban in Hungary. In fact he comes from a different tradition: a true belief in open markets and individual liberty."

“He is a down-the-line libertarian who loves free trade, welcomes immigration, ignores culture wars, and has no problem with transgender people ("provided they don’t send me the bill").”

     According to an article in The Guardian:

“…the national statistics agency announced that Argentina had exited a severe recession, with GDP growing 3.9% from July to September compared with the previous quarter.”

     The austerity measures, though perhaps needed, have been a disaster for the poorest in the country. Gasoline subsidies have been cut. The price of food has risen. Rents have risen for low-income people. The halting of public works has resulted in job cuts. Milei did warn that things will get worse before they got better. Will Trump and Musk pipe a similar tune in the day ahead?

     Among the poor, many have lost their jobs. Some parts of the country are poorly developed with little or no access to potable water and bathroom facilities. More people are relying on soup kitchens for food. Milei cut public work projects and government pensions.

     Milei is now claiming that the period of pain is over. According to the BBC:

“The poverty figure for the first six months of this year was 52.9%, up from 41.7% in the second half of 2023, said the country's Indec statistics agency.”

     Milei’s coalition does not have a majority in Congress so there are checks and balances against some of his reforming power. Trade unions have protested his policies.

 According to Business Insider, Milei recently told Forbes Argentina of further reforms:

“We'll advance privatization, deepen labor reforms, and eliminate 90% of taxes — not revenue, but the number of taxes — moving to a simplified system with no more than six taxes at most."

“It is not only a question of deregulating and removing these obstacles, but it also implies a new reform of the state to make it even smaller," he said.

“Milei added that his administration has so far only implemented a quarter of the reforms it wants to pursue.”

     While Musk and Ramaswami are obviously impressed and inspired by Milei’s reforms, those who are losing out, namely the poor, will have to wait for some “trickle-down” effects to benefit.

     While the economic indicators have been good, there has been a recession and not everyone is pleased with the reform results so far.

“However, Facundo Nejamkis, director of Opina Argentina, a political consultancy firm, told Reuters this month that Milei's cuts had ignited a "major" recession, and according to Argentina's statistics agency, the country's poverty rate rose to 52.9% in the first half of 2024, the highest rate in 30 years.”

     Milei now claims the recession is over and that it was just the necessary initial pain of the reforms. Time will tell. Meanwhile, more people are still relying on food banks to eat.

Argentina’s Economic Weapon of the Future: Vaca Muerta Shale

     NOVI Labs’ Ted Cross notes that Argentina’s Vaca Muerta Shale wells are probably the best shale wells in the world with oil production 30% higher than in the Permian Basin of West Texas and gas production that much higher than in the Marcellus, all in the same Nequin Basin, which also has an aerial extent bigger than the Permian. However, there are significant political risks, which should decrease as time goes on. Argentina is not likely to nationalize oil and gas companies, at least not under Milei. Offtake is a factor, especially for natural gas, but pipelines and LNG export capabilities are being developed. Another problematic issue that can be overcome over time is the high costs of development. Those costs should come down as infrastructure, equipment, and labor become more capable and efficient. It is a true opportunity to develop an economic engine that benefits everyone in the country. As I noted in a 2023 post about the Vaca Muerta, the goal is to first supply all of Argentina’s oil & gas needs which have faltered in the past as fields in other basins have depleted. Then, the country can work on exporting LNG and oil, make deals to sell via pipelines to adjacent countries, and use the hydrocarbons for local industries.

     Time will tell if Milei’s reforms will be successful. Clearly, the past policies of leftist governments that relied on government subsidization of the poor have not worked for the general economy. The country clearly needs investment. Oil and gas can be a very successful investment opportunity for the country if costs can come down as more rigs drill and more pipelines transport those hydrocarbons.

     As the recent EIA graph below shows Argentina’s oil and gas production are both now up to and near previous peak levels after the drop-off due to depletion in the country’s other oil & gas basins. The Vaca Muerta Shale and associated tight rocks are now making up to half or more of the country’s hydrocarbon production and that will rise more and more as time goes on.

     According to the EIA:

“We estimate that the Vaca Muerta shale formation, located mainly in Argentina’s Neuquén province, has 308 trillion cubic feet of technically recoverable shale gas resources and 16 billion barrels of technically recoverable shale oil and condensate resources. Argentina ranks among the world’s top five holders of shale crude oil and natural gas resources.”

     Both oil and natural gas exports have grown:

“Argentina’s crude oil exports increased by an average of 33% per year from 30,000 b/d in 2017 to 128,000 b/d in 2023. Shale crude oil accounted for about 70% of crude oil exported in 2023. Argentina's primary destinations for crude oil exports in 2023 were the United States, Brazil, and Chile. The recent completion of the Vaca Muerta Norte Oil Pipeline helped facilitate exports to Chile.”

     Argentina is still importing some LNG for winter heating. This can be eliminated by the development of gas storage capacity. They imported about 200MMCF/day in 2024 which was a big drop from 2023. Reversing pipelines that once imported gas from Bolivia to exporting gas to Brazil from the Vaca Muerta is underway. Exports to Chile have also increased. As noted below, economic reforms have been enacted to improve international investment in the resources.

“Argentina's government has implemented new policies to boost energy production and exports, including the Plan Gas.Ar. In addition, the Plan Gas IV Program expanded export authorizations and four-year export contracts for natural gas—the country’s first multiyear contracts in two decades. Last July, Argentina’s Congress also passed a Promotional Regime for Large Investment (RIGI), aiming to provide certainty and legal stability to investors by offering tax, customs, and currency exchange incentives, which could support new spending on infrastructure.”

“Several companies are planning floating LNG (FLNG) infrastructure in the coming years. Golar LNG has a 20-year agreement with Pan American Energy (PAE) to deploy an FLNG vessel in Argentina by 2027, targeting a production capacity of 2.45 million metric tons per year (MMmt/y). Tecpetrol SA is designing a modular onshore plant with an initial capacity of 4 MMmt/y. YPF SA, Argentina’s state-controlled energy company, plans to bring an existing FLNG facility online by 2027, aiming for 1 MMmt/y to 2 MMmt/y of additional export capacity. It is also seeking new investors for an LNG export project in Rio Negro, despite uncertainties regarding Petronas's involvement and significant infrastructure costs.”

     The bottom line is that oil & gas wealth will eventually increase the wealth of Argentinians.

 

References:

 

Foul-mouthed Milei shows libertarians the way. Opinion by Dan Hannan, Washington Examiner. December 13, 2024. Foul-mouthed Milei shows libertarians the way

‘Everything is so bad’: Argentina’s poor hit hard by Milei’s ‘chainsaw’ measures. Harriet Barber, Tom Phillips and Facundo Iglesia in Buenos Aires. The Guardian. December 18, 2024. ‘Everything is so bad’: Argentina’s poor hit hard by Milei’s ‘chainsaw’ measures

DOGE inspiration Javier Milei says he'll reform Argentina's tax system to have no more than 6 taxes. Thibault Spirlet. Business Insider. December 23, 2024. DOGE inspiration Javier Milei says he'll reform Argentina's tax system to have no more than 6 taxes

Argentina records sharp rise in poverty. Robert Plummer. BBC. September 27, 2024. Argentina records sharp rise in poverty

Argentina’s crude oil and natural gas production near record highs. Energy Information Administration. Today in Energy. December 5, 2024. Argentina’s crude oil and natural gas production near record highs - U.S. Energy Information Administration (EIA)