MercoPress. South Atlantic News Agency

British interest in Paraguayan oil potential.

British-based CDS Oil & Gas Group officially expressed this week its interest in exploring for petroleum and natural gas fields in northwestern Paraguay, revealed British ambassador in Asunción.

According to local press reports Ambassador Anthony Cantor informed the Paraguayan government of CDS Oil and other British companies' interest, given the potential hydrocarbon resources in the landlocked South American country.

Last May CDS Oil announced that the "Independencia-1" well drilled in Gabino Mendoza field, in the Chaco region north of the country, indicated "that Paraguay has the potential of holding hydrocarbons".

"Expectations are very positive. Official reports indicate that the field is promising, and according to studies could meet domestic demand for the next 20 years" Deputy Mining and Energy Minister Hector Ruiz Diaz was quoted by the Asunción press.

Mr. Ruiz Diaz said the discovery was made in a 600-meter (1,970-foot) well drilled in 1993. New wells will be drilled at three times that depth to determine the feasibility of extracting natural gas in commercial volumes.

In Paraguay oil and gas exploration began in 1947, mainly in the Chaco region, which is wedged between petroleum-rich areas in Argentina and Bolivia.

"Of the 48 wells we have drilled so far in the country, practically 50% reveal the presence of hydrocarbons, so that -- given the oil price crisis ? corporations are looking favourably on us" added Deputy Minister Ruiz Diaz.

However Mr. Ruiz Diaz said that it will take at least two months to determine the well's reserves, as well as the feasibility of extracting natural gas in the Chaco area for the local market.

Almost seven decades ago (1932/1935) Paraguay and neighbouring Bolivia, both landlocked countries, were involved in a war over the control of the northern territory of Chaco. Described as a territorial dispute in mostly unmarked territory but with access to the crucial river Paraguay basin giving sea access, the war was also nicknamed after one of the main American oil companies of the time, which allegedly was financing the Bolivian attackers with the purpose of being awarded "vast oil deposits" in northern Chaco.

However, after the loss of over 100,000 combatants and the appalling economic condition of both countries, regional mediation finally put an end to the conflict. Nevertheless the fierceness and fighting spirit of Paraguayan troops, and a far superior Command ensured the country the definitive control of Chaco and the Paraguay river basin.