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How Yamal Geophysicists Found Oil in Paraguay

by Alena Lipyavko | Dec 16, 2012

Oil&Gas Journal Russia, 17.12. 2012

It would appear that there was some reason after all for the Chaco War that broke out between Paraguay and Bolivia over a disputed border region, where signs of an oilfield were discovered in the 1920s. Oil has actually been found in northwest Paraguay. Nobody is saying how much has been discovered exactly, but Paraguay's president, Frederico Franco, is full of optimism. He says the field, near the mouth of the River Piriti, is a “fairly large one and its oil is of good quality”. Drilling is in full swing, and production is expected to start in the spring or summer of 2013. Another name could soon be added to the list of oil producing nations.

Key words: Paraguay, oil, prospecting and exploration, energy security.

The history of Paraguayan oil is full of bitterness and hardship as well as sadness. It all started back in 1928 with the assumption that there were oil deposits near the border with Argentina at the mouth of the River Piriti, in the province of Boqueron (in the Gran-Chaco region) in the North-West of Paraguay. A few years later, rumours about the region's oil wealth provoked an armed conflict between Paraguay and neighbouring Bolivia that also indicated its claims on the supposed oil-producing area. Soon two corporations joined the struggle for resources: American Standard Oil, which supported Bolivia, and Shell Oil, on the side of Paraguay. The latter, after winning the war, received three quarters of the disputed territory, but did not manage to find oil there. The port on the Paraguay River, prudently built for the transportation of hydrocarbons, was unnecessary and the human cost of this project could have been avoided.

While there is life there is hope

Tribute should be paid to the authorities of Paraguay: they didn’t abandon attempts to find oil at the recovered territory. And, as it turned out, it was not in vain. In 1975, American ExxonMobil started exploration of the Chaco region and in 1986, exploration works were conducted, creating a detailed seismic study of the area’s mineral resources, based on the data collected by the company. However, the study didn’t help to identify any potential oil and gas areas to commence exploration drilling. As a result, the exploration of this site was terminated without deep drilling, despite the fact that by this time the real oil potential of the Pirity basin had already been confirmed by the discovery of oil deposits in the Cretaceous deposits of the Argentinian Palmar Largo unit. There were several important reasons that led to the failure of the oil scouts in that period. Firstly, a significant amount of work was focused on the study of the Paleozoic deposits, in an attempt to detect Bolivian deposit types but these deposits were identified in Bolivia and Argentina, in a different tectonic zone compared to the Chaco basin.  Secondly, in most cases the seismic and drilling work was not agreed and was conducted by different companies at different times. In other words, there was no single systematic approach to the study of the oil and gas in the region. By the beginning of the 1990s, the activity of oil companies trying to find oil in Paraguay decreased significantly. A new round of exploration began only after the adoption of an investor-friendly oil law that guaranteed long-term investments in late 1995.

 “The Russian period” of exploration

Russian geophysics inherited the helm of their predecessors. In 1997, the company Arktiknefterazvedka, a subsidiary of OJSC Yamalgeofizika (now part of IGSS), obtained a license for conducting seismic surveys in the Chaco region (consisting of an area totalling ​​950 thousand hectares). Upon completion of the detailed seismic study and the specification of the location of three exploration wells, the company started the exploration phase. Works in the licensed area, located in the province of Boqueron, were conducted between May and September of 1997. Assessing the hydrocarbon potential of the region, the company specialists used information about the productivity of the Phanerozoic sediments in the Pre-Andean basins of Bolivia and Argentina, as well as the results of exploration drilling at the Palmar Largo unit deposits in the Argentinaian segment of the Pirity basin and in the North-Western part of Paraguay (in the province of Boqueron). The primary data processing was carried out in the field itself. The complete records were available just 10-12 hours after the field’s registration. The final data processing and interpretation was completed in April 1998, using the recording service of Yamalgeofizika with the participation of specialists from the Gubkin Russian State University of Oil and Gas, the Sverdlovsk Mining Institute and the Federal State Unitary Enterprise Institute of Geophysics. For seismic data processing three cooperating technologies were used (AVD method, seismic tomography and DMF), each of them at the time already had an example of a successful testing in a variety of geological conditions, including areas with similar geological features to the Pirity basin: for example, rift basins of the North Sea and the Red Sea, the Bach Ho (White Tiger) deposit in Vietnam with volcanic reservoirs, etc. The work carried out there helped the company's specialists to identify several types of oil and gas prospective structures and to give a positive evaluation of the whole region. This data was finally confirmed only recently, in November 2012.

 On the way to oil independence

It is quite possible that Venezuela's refusal to supply oil to Paraguay provided the impetus to refine the results of the seismic studies obtained by the Russian geophysicists in the late 1990s. Caracas took this decision in order to remove the former President Fernando Lugo from power in June 2012. Details about the scale of the hydrocarbon reserves have not been announced yet, but according to some reports, they amount to 243 million barrels of oil and about 4.55 billion m3 of gas. According to experts, this volume is sufficient enough to cater to the demands of Paraguay for the next 25 years. Currently, drilling works are in full swing and are being conducted by Crescent Global Oil (a division of the American Crescent Oil) and Pirity Hidrocarburo (a division of the American PetroVictory). The commercial production of oil is planned for Spring-Summer 2013. This date was announced by the current President, Federico Franco, who visited the new oil and gas region, at a meeting with potential investors. Overall, for Paraguay establishing its own oil fields means if not the end but at least the reduction of its energy dependence on neighbouring Brazil and Argentina, as well as Algeria, where the country also buys oil and petroleum products. However, it is possible in the long term. There is still practically no oil and gas infrastructure in the country and the construction of this infrastructure will take many years. Before the first oil refinery will be constructed most of the oil produced in the Chaco region will already have been exported.