ENAP to carry out first horizontal well for tight gas in Chile
Tuesday, May 02, 2017
Chile’s state oil company ENAP is preparing to carry out its first horizontal drilling for natural gas resources in a tight play this year, as it seeks to reduce imports over the long term.

The company will drill the multi-frack stage well with US-based ConocoPhillips, its partner on the project in Magallanes, a basin in the far south of the country.

The horizontal well will be drilled “by the end of the year,” ENAP’s general manager, Marcelo Tokman, said last week at ARPEL 2017, a Latin American and Caribbean oil and gas conference in Punta del Este, Uruguay.

ENAP and ConocoPhillips teamed up on the project last June, committing to invest US$100 million in the first four years of the project. They are exploring the tight gas potential of the Coiron block in the Magallanes Region, a source of conventional oil and gas encompassing both onshore and offshore blocks.

Tokman said the partnership with ConocoPhillips, one of the world’s biggest shale producers, had brought it knowledge about drilling in unconventional plays, helping to speed up its learning and cut per-well costs by 50% over the past two years. This has come through incorporating pad drilling and new techniques, among other things, he said. The horizontal drilling should reduce costs further, he added.

ENAP is seeking to ramp up gas production from Magallanes to supply that region and Methanex, a Vancouver, Canada-based company that uses the gas as feedstock for making methanol, a raw material for manufacturing chemicals and fuels for race cars.

Methanex has a methanol complex in Magallanes that has run at below capacity for much of the past decade given that Argentina has restricted gas deliveries to deal with shortages at home. The cutbacks have also hit the rest of Chile, which had been buying up to 20 mcm per day of gas from Argentina as recently as 2004.

In response, ENAP started increasing local drilling for gas. The country also ramped up renewable energy capacity and built two regasification terminals for importing LNG. A third LNG regasification terminal is planned.

In the long term, however, Tokman said an increase in tight gas production from Magallanes could help reduce and eventually replace the LNG imports. Magallanes has over 8 tcf (235 bcm) of tight gas resources, according to a 2016 estimate by the US Geological Service (USGS).

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