Tests Give Enap Confidence in Mercedes Gas

Gas and oil flow tests on two of three natural gas reservoirs in southern Chile's second Lago Mercedes well have given state oil company Enap greater confidence in the basin's commercial viability, Enap announced.

All three reservoirs are located at depths from 3,700 meters-4,080 meters.

Enap has decided to start drilling the third Lago Mercedes well and will compare results to the second well in order to quantify the field's total reserves.

The well would need to produce at least 125,000 cubic meters of gas a day to be commercially viable.

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.

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

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