Sebastián D. Penelli Pan American Energy (PAE) confirmed it has discovered shale gas in Cerro Dragón within Chubut province’s Gulf of San Jorge basin. The company announced it will now convert the area into an unconventional hydrocarbon exploitation concession.
The company, which has been operating in Chubut for almost 70 years, will continue its conventional activities while also moving forward with an ambitious pilot project to explore and develop the potential of the Gulf San Jorge Basin’s unconventional fields. The field is the second-largest in the country, but its deposits are mature and production is declining.
According to the energy secretariat’s most recent production data published by Economía y Energía consultancy, the Gulf of San Jorge produced 189,000 daily barrels of oil equivalent, 4.8% less than last year and over 7% less than in the same month of 2023.
The mature Patagonian basin, which is shared by Chubut and Santa Cruz provinces, produced 10.1 MMm³/d of gas, 9.2% less than a year before and 10.3% less than in the same month of 2023.
Confirmation of shale gas’ potential
The gas was discovered in the D-129 formation, one of Chubut’s main geological structures. PAE verified the presence of shale gas through studies including 3D seismic surveys, analysis of data from existing wells, and drilling an exploratory well.
The results confirmed intervals between 70 and 150 meters thick at a depth of less than 3,500 meters, with wet gas at overpressure levels suitable for unconventional production.
Based on these results, PAE has asked Chubut province to convert the area, in line with Federal Hydrocarbon Law 17,319 and national decree 1057/24. The new concession was approved via a provincial decree for a period of 35 years, with a ten-year extension due to the scale of the investment.
Pilot project and unconventional development
The conversion involves a pilot project to drill five wells, 3,500 meters deep, and 3,000 meters of horizontal development.
The first well, already drilled, showed the project’s feasibility. It has a 1,500m lateral branch and 25 hydraulic fracturing stages, confirming the presence of shale gas.
The company will also implement tertiary recovery techniques in over 50 existing wells, with an estimated investment of US$250 million.
‘We will lead shale exploration’
PAE Group CEO Marcos Bulgheroni said: “We have been investing steadily in the Gulf of San Jorge for 70 years. The Cerro Dragón area is currently the country’s main producer of conventional hydrocarbons, and now we will lead shale exploration in the basin. I thank [Chubut] Governor Ignacio Torres for his political and technical commitment to make this process viable.”
“We will bring new life to this field, which is our home, and we will dedicate lots of time to it,” he added.
Torres called the discovery “a historic milestone that marks a new productive stage,” continuing: “Confirmation of shale gas opens an enormous opportunity for the province, improving the productivity of mature wells and attracting new investment. Following the execution of the pilot project, we are optimistic about unconventional development.”
Over the next five years, Chubut will receive over US$90 million from the conversion, in addition to royalties tied to increased productivity and local economic reactivation.
PAE has announced a scholarship program aimed at key jobs like oil engineering, geophysics, and geology. They will also prioritize local suppliers and strengthen a program of loan guarantees for small and medium companies in the region.
