Will Paraguay upstream call draw investors?

Wednesday, November 29, 2017

In 2009, Emilio Buongermini, then hydrocarbons director at Paraguay's public works and communications ministry, told BNamericas that oil production in the country could begin in 2010-11.

Eight years later, upstream activity in the country has not moved beyond exploration, the bulk of which has been carried out by Amerisur Resources and President Energy, both of whom, however, are now focusing on their assets in Colombia and Argentina, respectively.

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Amerisur has said that "very little capital will be spent on the Paraguay acreage" until results are studied from a technical program following a non-commercial discovery at the Jaguareté-1 exploration well on the San Pedro block.

For its part, President Energy has a farm-out process underway for its Paraguay concessions.

Without doubt, the unfavorable pricing environment has impacted upstream activity in Paraguay as operators prioritize limited funds, as well as the lack of solid technical data to help prove up the resource.

"The presentation of well evaluated technical data, integrating modern technologies and market aspects will permit an ever improving quantitative evaluation process, significantly reducing hydrocarbons exploration risk in the country," according to a report on the hydrocarbons potential of Paraguay from state oil company Petropar.

Other factors to take into account include a proposed pipeline that would supply natural gas from Bolivia and the ramp up of E&P activity in Argentina, in particular for non-conventional resources.

In a bid to break the upstream lull and as part of Paraguay's national energy policy, which aims to guarantee hydrocarbons autonomy in the medium term, Petropar has launched an E&P call for blocks Palo Santo and Petropar III.

The minimum work program includes collecting and evaluating historical technical data; reprocessing and reinterpreting existing geophysical data; carrying out an environmental impact evaluation (only for Petropar III); acquiring, processing and interpreting 500km of 2D seismic; and drilling two exploratory wells, according to bidding rules.

The PSA contracts envision an exploration phase of four years, which may be prolonged by up to two years, and a production period of 20 years that may be extended for 10 years.

Offers will be accepted December 18-29, and opened on December 29, with awarding and contract signing scheduled for January.

"Judging by what we have seen, it is impossible to have any conviction that this call will lead to any change to the current scenario," says Christopher Lenton, who heads energy coverage at BNamericas.

Read BNamericas Intelligence Series Report The Ups and Downs of Frontier Oil Regions: Uruguay, Cuba, Guyana, Paraguay

Pictured: Petropar head Eddie Jara announces upstream call after meeting with President Horacio Cartes (CREDIT: Paraguay government)