Oil Boom in Paraguay? Bumps Ahead: Exploration and Navigating the Paraguayan Government

UPDATE: For more recent news on Oil in Paraguay, here.

Region of Oil/Gas Exploration Circled

Paraguay's Chaco region borders Argentina's and Bolivia's petroleum and natural gas zones and for many years there's been speculation that there might be oil and gas in northwest Paraguay. Amerisur Resources (UK-based) has just received permission from the Paraguayan government to explore the Piriti-Pilar Basin for oil and natural gas.

Another company, Texas-based Crescent Group, has held a concession for the Piriti Basin since 2008, but it's hit a few legal road bumps which have recently been resolved in drafting a new agreement.

These developments are interesting for a few reasons. First, none of the potential petro stuff is new news--every few years there are announcements that exploration and drilling in the Chaco are set to start. But what is interesting is where the authority over oil and gas lies within the Paraguayan government: the Ministry of Public Works and Communication. And this might be why there's so much confusion with the Crescent Group (and why Paraguay's public learned of the Amerisur developments via the London Stock Exchange rather than any government announcement in Paraguay). Rather than creating a separate energy ministry (which is how Brazil's government is organized) to administer the hydroelectric and now potentially hydrocarbon resources, there is a Vice-Ministry of Mines and Energy under Public Works. 

The Vice-Ministry has been traditionally focused on Paraguay's vast hydroelectric resources and so the oil-gas concerns are but a side note. Currently it's headed by leftist Mercedes Canese, the daughter of well-known ItaipĂș-dam activist Ricardo Canese who has been involved with pressuring Brazil to renegotiate the amount of money Paraguay receives for its ItaipĂș energy sold on the Brazilian market. The Vice Minister is from the part of the President Lugo coalition that is most leery of foreign investment (and certainly of private firms) and that most admires the way Morales has steered Bolivia's energy policy in a nationalistic and social re-investment direction.

Thus, the Vice-Ministry's posture and the little institutional development for how to administer oil and gas resources (e.g., the person in charge of hydrocarbons within the Vice-Ministry has a background in biology and ecology but not in energy) imply that there will likely be more road bumps ahead.

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