Investment in the well will be about US$4mn, CDS president and CEO James Wade told BNamericas.
Drilling should be completed in about 1.5-2 months, Wade said. "It should be a fairly quick well if we don't find any difficulties."
The 3,200m Independencia III well, which would be CDS' first well in the country, will be 200 meters from the Independencia I well drilled in 1993 by Paraguayan company Primo Cano Martínez.
The Independencia I well was tested in March 2004 at 960,000 cubic feet a day of dry gas, of which 94% was methane.
"We're hopeful of finding gas but until we drill we just don't know," Wade said, adding it is "premature" to speculate on markets for the gas.
The Chaco basin is in the northwestern part of Paraguay near the Bolivian border.
Nabors International has begun mobilizing the 426 rig that was on standby for CDS from Santa Cruz in Bolivia to the Gabino Mendoza block, the statement said.
CDS listed on London's AIM market on September 29. The proceeds of the listing will provide the funds to drill the company's first well in Paraguay and provide additional working capital, Wade said.
CDS was formed in March 2004 to pursue the oil and gas exploration and development potential in the Chaco basin.
CDS Energy, a 98.1%-owned subsidiary of CDS, holds licenses for three blocks covering a total 2.9 million ha in the Chaco basin. CDS Energy has 100% working interests in the 40,000ha Gabino Mendoza block, the 2.3 million ha Boqueron block and the 491,077ha PG & E block.
Primo Cano Martínez has a 3.5% gross overriding royalty (GORR) in the Gabino Mendoza block and local company PG & E has a 0.6% GORR on the PG & E block. From 1947-1993 exploration programs conducted by several US and local oil companies drilled 26 wells on CDS properties of which 22 had hydrocarbon shows, the statement said.
CDS has identified several prospects and leads and intends to follow a drilling strategy of 200m step-out twins of old wells with hydrocarbon shows. It is planning to drill at least one well on each block" subject to available funds," the statement said.
"We have plans for additional wells and we'll talk about those in due course," Wade said. "We'll cross that bridge when we come to it."
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