In the 1920s and ’30s Paraguay fought a bloody seven-year war with Bolivia over the Chaco region, partly fueled by rumors of huge oil reserves lying beneath the area. Paraguay won the war and the extra territory – yet despite the drilling of more than 50 wells since then, the first potentially significant discovery of hydrocarbons in the country was not made until 2014. With hydrocarbon-producing regions in Brazil, Argentina and Bolivia to the east, south and north-west respectively, it is not surprising to learn that in 2011 the USGS estimated Paraguay’s undiscovered hydrocarbon resource potential to be 27.95 Bboe, the majority in the Paleozoic. These estimates include unconventional resource potential; the US Energy Information Administration (EIA) in 2013 forecast unproven wet-shale gas technically recoverable resources for Paraguay to be 75 Tcf.
Long History, Little Success
Exploration in the Bolivian Foothills section of the Chaco Basin has been ongoing since the 1900s and has resulted in the discovery of a number of large fields, but this has not been replicated over the border in Paraguay. It was not until the 1940s that the first seismic was acquired in the country, by Union Oil, who drilled five wells in the west between 1947 and 1949. Despite some indications of gas, there was then a ten-year drilling hiatus, and only seven further wells were drilled by 1967. Pennzoil entered the fray in 1971, looking at very shallow Devonian oil deposits, but none of the 16 wells they spudded in western Paraguay that year proved commercial.
A seismic study by Exxon in the Chaco region in the 1980s led them to pull out of the area after drilling a single well – but with the benefit of hindsight it appeared that explorers at the time were trying to replicate the discoveries over the border in Bolivia rather than look at correlations with Argentina. More than half of the 20 wells drilled between 1971 and 1997 actually found evidence of hydrocarbons, including the first few wells drilled in the eastern Paraná Basin, but dry hole analysis suggests that many were not valid structures and none proved the breakthrough needed. Exploration once again ground to a halt.
The end of the 35-year repressive dictatorship of Alfredo Stroessner in 1989 was the impetus for a 1995 change in the hydrocarbons law, making it more attractive for foreign investors. Shortly afterwards a Russian consortium acquired seismic and prepared prospectivity studies, which gave a positive interpretation. However, only one further well was drilled before 2012, when President Energy undertook an extensive seismic campaign, including the first ever 3D in the country, to evaluate the Chaco Basin potential and define high-graded drilling prospects. This was followed up by two wells in the basin in 2014, which proved an active petroleum system and found evidence of good oil- and gas-bearing Paleozoic sands. After a long time in the doldrums, maybe Paraguay’s potential is finally be about to be revealed.
Two Main Sedimentary Basins
Paraguay lies at the center of South America where several major cratons meet, bounded on the west by the Andes and on the north-east by the Brazilian shield. The main structural lineaments trend north-west and north-east, and periods of reactivation throughout the area’s geological history have resulted in subsidence and the deposition of significant thicknesses of sediment.
The Paraguay River, which runs north-south through the middle of the country, roughly divides it geologically, with the western half dominated by thick Tertiary and Quaternary sediments. To the east of the river Mesozoic and Paleozoic sediments and Mesozoic volcanics overlie Precambrian and early Paleozoic crystalline basement, which outcrop as topographic highs. There are two main basins separated by the Asuncion anticline, which is roughly parallel to the Paraguay River.
The large Paraná Basin reaches from northern Argentina through Uruguay to central Brazil, and extends into south-west Paraguay, where it covers an area of 110,000 km2. It is dominated by Mesozoic sediments towards the east, with older Paleozoic material present towards the basin edges close to the Paraguay River, in places amassing over 5 km of sediment. The basin developed in north-east to south-west elongated depressions which follow the Precambrian substrate. The Paraná Basin has remained at moderate burial depth throughout its history and the bulk of thermal maturation probably took place during the late Jurassic to early Cretaceous igneous episode.
West of the Paraguay River is the Chaco Basin, a large intra-cratonic asymmetric foreland basin located predominantly in north-western Paraguay and south-eastern Bolivia. It is structurally relatively simple, with scattered, mainly vertical, normal faults and none of the thrusting typical of Andean tectonics further to the west. It has a thick covering of Tertiary terrestrial sediments, predominantly fine sands and clays, underlain by older rocks. Over 2 Bcfgpd and 50,000 bopd have been produced from this basin in Bolivia and Argentina, and estimates have suggested that the Paraguayan section could hold at least 4 Bbo.
Promising Petroleum Systems
A Paleozoic petroleum system has been recognized in the Paraguayan Paraná Basin, analogous with fields like Barra Bonita across the border in Brazil, but only a handful of wells have been drilled to date. The most recent was Amerisur’s Jaguereté-1 in 2016, which found indications of oil and gas in low porosity Devonian sandstones, possibly sourced from Devonian black shales.
The Paleozoic sequence in the Chaco Basin is dominated by shallow marine clastics and organic-rich deeper marine shales, with Silurian and Devonian shales providing the main source rock for the Paleozoic petroleum system, with interbedded sandstones as the primary reservoirs. By contrast, the Mesozoic rocks are predominantly continental, deposited during periods of intense rifting and magmatism associated with the opening of the South Atlantic. Potential reservoirs include volcanics, similar to those found over the border in Argentina’s Palmar Largo field, and stacked fluvial and lacustrine sediments, together with eolian sands and shallow marine carbonates. Upper Cretaceous/Lower Paleocene carbonates and shales provide the main source rocks.
As the Andean mountain ranges developed to the west during the Cenozoic, they provided a new sediment source fine sands and clays. The faulting and uplift which resulted from this deformation created most of the structural features and resulting traps in the Chaco Basin, often reactivating Mesozoic rift-related structures.
At the deeper level the Paraguayan Chaco Basin is divided into four sub-basins: Pilar, Pirity, Carandaity and Curupaity. The last two were originally considered the most prospective, and almost half the wells drilled have been in Carandaity, most in the ’70s, while the Curupaity has only four wells. The main geological targets in these two sub-basins are Carboniferous and Devonian, sourced by Devonian and Silurian shales, with the Mesozoic cover thinner and less prospective than further south. Carandaity is considered gas-prone, while a slightly lower source rock temperature means Curupaity is likely to contain oil.
South-east of Carandaity is the Pirity Sub-basin, which has been attracting interest in recent years because it extends south-westwards into Argentina, where 152 MMboe have been produced from a number of fields in the same Cretaceous rift. These include Palmar Largo, lying just 20 km from the border, which has produced over 50 MMbo from Upper Cretaceous volcanic reservoirs, which are also present in the Paraguayan section. Similar structures can also be seen in Pirity, with tilted Paleozoic fault blocks being the main traps, charged from the down-dip central basin kitchens in the Cretaceous, and potential additional charge from Devonian and Silurian sources.
In 2014 President Energy drilled two wells targeting the Paleozoic gas play in the Pirity Sub-basin, proving for the first time that the prolific Devonian and Silurian petroleum systems of south-east Bolivia and north-west Argentina extend into Paraguay. The first, Jacaranda, found carboniferous reservoirs without topseal, plus 800m of Devonian source rock but only limited upper Devonian reservoir before the well was TD’d. Inadequate seal is an issue which has dogged a number of Paraguayan wells. The second well, Lapacho, found oil in the Lower Devonian and gas in deeper Silurian, although testing was terminated prematurely due to mechanical problems.
The Pilar Sub-basin is thought to be a pull-apart basin characterized by steep north-west to south-east basin bounding faults with intrusions related to early Andean orogeny. It is essentially unexplored, with a single dry well drilled back in 1949, and is thought to hold considerable thicknesses of potentially hydrocarbon-generating marine Devonian sediments.
In addition to conventional hydrocarbon resources, Paraguay is believed to have considerable unconventional potential. Risked technically recoverable shale gas and oil resources from the thick Devonian shales in the Paraguay portion of the Paraná Basin are estimated (EIA) to be in the region of 8 Tcf shale gas and 0.6 Bb shale oil and condensate, while rocks of the same age in the Chaco Basin are thought to have 67 Tcf shale gas and 3.2 Bb shale oil and condensate. The gas window in this basin is reportedly at about 2 km depth and the structural setting is relatively simple.
In total, this suggests that Paraguay has the fifth largest resource base in Latin America. Although this has yet to be actively investigated, a number of companies with conventional licenses in the country are interested in following up this potential.
Paraguay imports and consumes around 33,000 bpd of refined products, the majority from Argentina and the United States. Little is used for electricity, as hydropower from the massive Itaipú and Yacyretá dams on the Paraná River provides nearly 100% of Paraguay’s electrical needs, with 90% of the electricity generated exported – a welcome source of income. The only refinery, built just outside the capital, Asunciόn, was mothballed in 2005 as it was more cost-effective to bring in refined oil, but it could be reopened if sufficient quantities of oil were discovered. There are also export options to Argentina.
The country has had a relatively turbulent political history since the overthrow of dictator Stroessner, including major political upheavals culminating in the assassination of a president in the late 1990s, the impeachment of another president in 2002, and the ousting of President Lugo in 2012. However, it does have fully democratic elections and since 2014 the economy has grown at a 4% average annual rate while other countries in the region have contracted. The government is keen to diversify economically and offers the oil and gas industry an attractive economic and fiscal regime, with a sliding scale royalty of 10–14% and a corporate tax rate of 10%. This means that even medium-sized fields could give good returns, especially in comparison to the more mature areas in neighboring countries. Permits are traditionally awarded for an initial one year, which can be converted to a concession with a four-year exploration period involving the drilling of one well. With a discovery, this progresses to a 20–30 year exploitation period.
Given the similarity in geological settings between Paraguayan basins and neighboring hydrocarbon-producing regions, plus the fact that the whole country is underexplored, the potential for finding commercial hydrocarbons seems very promising. Most wells were drilled over 40 years ago, and many were shallow and drilled on little geophysical data. Exploration was piecemeal and sporadic, with no geochemical work and little attempt at regional analyses.
Reprocessed seismic data, recent concepts in seismic stratigraphy and the analysis and interpretation of multiple databases from several previous operators suggest that, despite the current lack of production and the slowdown in exploration due to lower commodity prices, there is every expectation that Paraguay will soon join the company of South American hydrocarbon-exporting nations.