This week we find ourselves back in Latin America, but in Paraguay, where an estimated 4 billion barrels of oil in one basin alone could turn the country into a net fuel exporter. But what we really like is the outcome of last week’s presidential elections, which could very likely set up foreign investors to take full advantage of this opportunity.
As we mentioned in last week’s Intel Notes, on 21 April, Horacio Cartes, a member of the Colorado Party, won Paraguay’s presidential elections, and he’s a businessman first and foremost who understands what it means to turn his country into a net fuel exporter. Cartes has no resource nationalism tendencies such as are sweeping across the region, and the general consensus is that he will govern from a pro-investment perspective that will benefit the oil and gas industry.
According to Southern Pulse, Paraguay’s hydrocarbons regulations are already appealing, and Cartes’ ascendancy to the presidency can only render the atmosphere more attractive to foreign investors. Law 779 includes a royalty on production that ranges from 10-15% of per-barrel revenue. Hydrocarbon licenses are granted and guaranteed by Congress, and tax laws for foreigners include benefits that are conducive to the high-risk nature of exploration and development.
For now, landlocked Paraguay hasn’t made that one big find that will put it on the map, but the potential is there and it’s a particularly nice venue for small- and medium-size companies that like to stay onshore. Exploration has only just gotten underway, so there’s plenty to explore.
Exploration was already being pursued more ambitiously in Paraguay under Cartes’ predecessors, but now we expect a more momentous increase. So far, eight exploration licenses have been granted, while 13 more licenses are being negotiated for shale gas.
Economically, Paraguay is sitting nicely: It’s a major producer of electricity, among other things, and it is poised for 11% growth next year. In fact, the World Bank and the United Nations say Paraguay’s economy is booming, making this country a Latin American superstar, ahead of Panama (9% expected growth) and Peru (6%).
The Big Prize: The Chaco
Oil and gas fields in Paraguay’s Chaco are geological and geographically close to major fields in Argentina and Bolivia—an important fact that is not lost on investors who have shown increasing interest in The Chaco of late.
The basins of the Chaco region are along the same geological rift as the oil producing basins of Argentina and Bolivia.
The key basin we’re looking at is Pirity, for conventional resources--but we’re also keeping an eye on the massive Devonian Los Monos Shale Formation.
Conventional Wisdom: The Pirity Basin
This basin is only a few kilometers from one of Argentina’s oldest and most prolific oil-producing areas, the Olmedo Basin. Yet, the Pirity Basin remains largely unexplored—and in fact, it is one of the few remaining unexplored onshore areas in the world.
Re-evaluation of older geological data from this basin shows that there is some serious commercial potential here. We’re looking at an estimated 4 billion barrels of oil equivalent, recoverable, in this basin alone.
The Pirity Basin is a Jurassic rift basin filled by Tertiary sediments, with occasional volcanic intrusions along old faults.
The short story is this:
• Potential 4 billion boe
• 5 million acres in southwestern Paraguay and only 8 exploratory wells so far
• Extends to the Olmedo Basin in Argentina (which has 155 exploration wells and has produced over 150 million barrels of oil
• Easy access for drilling rigs and equipment from Argentina and Bolivia
Here’s what the playing field looks like so far (but check out our pick in this territory elsewhere in this week’s newsletter):
The following blocks have been licensed out so far:
1 Primo Cano Martinez
5 President Energy Paraguay S.A.
17 Aurora Petroleos
18 Boreal Petroleos
19 President Energy Paraguay S.A.
Crescent Global Oil Paraguay S.A.
The following licenses are being negotiated:
6 Riviera S.A.
7 Hidrocarburos Chaco S.A.
11 MB Energia S.A.
13 C.P.P. S.A.
20 Land Oil/Crescent Oil Paraguay
The following concession is under revision:
21 Paraguay Gas & Energy S.A.
The following licenses are undergoing the permit process:
8 YPF S.A.
9 AET Paraguay S.A.
10 Kilwer S.A.
12 Petropar S.A.
14 Amerisur R. PLC
15 Amerisur R. PLC
16 Amerisur R. PLC
17 Quincy Energy S.A.
Unconventional Potential—A Shale Formation to Rival Marcellus
Paraguay’s shale gas potential will largely be found in the borderline basin of Chaco-Paraná in the Devonian Los Monos Shale Formation. This area is over 500,000 km2 and covers most of Paraguay and a small part of Uruguay. Geologically, it is said to be similar to other basins east of the Andes Mount Range, with a thick sequence of marine Paleozoic rock overlaid by continental Mesozoic deposits.
The gas deposits in this shale formation will be found in the sub basins of Caradayty and Curupayty at a thickness of up to 12,000 feet of black shale rich in organic matter and deposited in shallow marine zones.
The most prospective sweet zone here is facing the Carandayty basin. Though we don’t know what’s technically recoverable here yet, geologists say the formations here are IDENTICAL to Marcellus.
Bottom Line: We like Paraguay’s economic forecast, and we really like the political and regulatory scene, which we think is on track to improve in the very near future. Get in on this one now while licenses are available, especially if you’re a junior company looking for those dwindling onshore opportunities where drilling is less expensive. If you’ve got enough working capital, look to Paraguay’s Devonian shale formation, because it’s just getting hot.
Want to know more about available opportunities? Contact Oilprice.com and ask about our intelligence service.