Shale Search in South America

Apache Corporation plans to drill its first natural gas well into a shale formation in Latin America before the end of the year, a company source said Friday.

Argentina has significant undeveloped hydrocarbon resources but also some of the lowest gas prices in the world, in large part because of governmental controls designed to curb inflation and bolster the competitive edge for manufacturers.

The controls, which began after a 2001-02 economic crash, have led to a cutback in exploration and production.  This has led to shortages, prompting the federal government to offer incentives under the Gas Plus program, which allows higher gas prices to help stimulate the exploration and development of natural gas resources in challenging geological scenarios.

Apache has four Gas Plus projects approved for development of tight sands and other unconventional gas resources as well as technical approval for two additional projects in the Neuquén Basin.

At La Calera, Apache will be conducting preliminary work is designed to identify the future potential of unconventional gas reserves at the field, which has been producing small volumes of oil and traditional gas.

La Celera is in the Neuquen Basin, a formation believed to have a high potential for shale and tight gas.

La Calera itself is near YPF's Loma La Lata and Total's Aguada Pichana fields, the country's two largest gas producers.

The economic viability of the shale gas project will depends on the
production potential of the reserves as well as gas prices, Apache said in a
statement.