Bachelet Confirms Natural Gas Discovery in Region XII

Chile's President Michelle Bachelet confirmed there is natural gas in the Lago Mercedes basin of the country's far south Region XII on Tuesday, according to a government statement.

State oil company Enap evaluated the final results of the study on Monday and concluded that the first exploration well found gas reserves in three specific locations, the statement said.

With Chile experiencing gas export restrictions from neighboring Argentina and seeking alternative sources of energy, this news marks a concrete development in what could be a blessing for the country.

However, it remains to be seen whether there exists sufficient gas reserves to begin production and commercialization, Bachelet said, adding Enap technicians plan to carry out prolonged flow tests of the well in May.

In order for the reserves to be commercially viable the well would need to produce at least 125,000 cubic meters of gas a day, according to the statement.

If the well's reserves prove viable, it could assure the supply of gas to Chile's Region XI through 2020 and eventually support the rest of the country's demand, the statement quoted Bachelet as saying.

"The probability that the existing gas is exploitable is very high because all the tests have been saturated with gas," local paper Diario Financiero quoted a source close to the evaluation works as saying.

"To be certain of the gas volumes we should drill at the least two or three more wells," the source said.

Gas produced in Lago Mercedes would be transported north to Punta Arenas, which would imply the construction of 400km of gas pipeline, the paper reported.

Bachelet will travel to Region XII next week to familiarize herself with the details of the exploration process, the statement said.

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 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.

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