Lagos: Enap Discovers Gas field in Magallanes

Chile's state oil company Enap has discovered a large gas field in the Lago Mercedes basin of Region XII that could supply gas to the south of the country, Chile's President Ricardo Lagos announced on Thursday during a radio interview.

Sergio Fernandez, a senator from the Magallanes region, classified Lagos' announcement as "good news" for energy supplies in southern Chile, according to a senate statement.

Drilling for natural gas in Lago Mercedes started in November 2005 and is being carried out by US-based Helmerich & Payne International Drilling (NYSE: HP). Enap signed a contract with the company in July 2005.

"Enap knows there is gas in the field, we just don't know how much," an Enap spokesperson told BNamericas.

Helmerich & Payne has drilled a little deeper than 3,000m but will not be able to quantify reserves until reaching 4,000m depth, the spokesperson said, adding that this target depth should be reached in April.

"I don't think we will be able to begin using the gas before the end of this year, but hopefully the magnitude of the gas field will be sufficient to help not only the southern zone but the entire country," senator Fernandez said in the statement.

The project includes the construction of three parallel 18-inch diameter pipelines - multipurpose, oil and gas - stretching 123km from the Lago Mercedes field to Enap's Cullen plant in Tierra del Fuego.

The project will be carried out in two phases. The first US$25mn phase is the construction of the multipurpose pipeline and the second the construction of the oil and gas pipelines and complementary production facilities at Lago Mercedes, increasing total investment to about US$70mn.

The idea is to supply gas to Canadian company Methanex's methanol plant near Punta Arenas, which has reduced its output due to Argentine gas restrictions.

Enap plans to invest roughly US$50mn in gas exploration in Region XII over the course of the next two years, local paper Estrategia reported. Enap has known about sizable gas reserves in Magallanes for decades but only now has the price of gas domestically risen to the point where E&P in this region has become feasible.

Chile has struggled with its lack of hydrocarbons reserves particularly over the course of the last few years as Argentine gas supply cuts have caused shortages and blackouts.

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