Oh, about that Paraguay oil….

What could possibly go wrong, indeed? Aleszu Bajak, whose website kicks my butt and impresses me deeply, just wrote a front page commentary in Latin America Oil & Gas Monitor.

Paraguay jumps the gun with oil strike announcement

Paraguayan President Federico Franco  last week announced his country had  found oil close to the border with  Argentina.  … Franco seems to have  been grandstanding and his comments  look well off the mark. The Pirity Basin  is believed to have potential as an oil  producer, but there has been no drilling  in the area since 1987.  …  Vicente Brunetti, a consultant based in  Paraguay who has written reports for the  United Nations in the past, told LatAmOil  that the announcement was a poor  misjudgement by Franco.  “The announcement is a joke,”  Brunetti said. “It’s based on exploration  that was done 30 to 35 years ago. This  didn’t happen yesterday.”  Oil companies on the ground were  quick to clarify the situation as well. UK-based President Energy, which operates in Paraguay’s arid Chaco region where the oil was allegedly discovered, responded to Franco’s announcement  with caution. “I think the president is  saying this with a lot of optimism and I  wish it were so,” said Patricia Macchi, a  spokesperson for President Energy, in a  radio interview last week. “We’re just  starting and there’s a long road ahead.”   Junior  Energy Minister Hugo Cacace was more  cautious in his choice of words than the  president. “There are just traces of oil in  the Chaco,” said Cacace in a radio  interview. “We need to move forward  with drilling to see if those traces are  enough to produce oil. We know it exists  and the expectations are high.”  … The country has so far failed to  generate any significant interest in its oil  and gas reserves, which has led the government to draw up a favourable  contract scheme for international oil  companies (IOCs) that are willing to invest there. It has a sliding scale royalty  system with a ceiling rate of 14%, and a  10% corporate tax rate.  The Carmen, Los Naranjos and Jurumi  plays in the Pirity Basin are believed to  be the most promising in the country,  although there is also growing interest in  shale gas plays that could draw in greater  investment.