In a milestone for Patagonia’s energy industry, Pan American Energy (PAE) began the first production tests (flowback) on its second shale gas well at the Cerro Dragón field in Chubut. These evaluations, conducted in early December, mark the operational start of the pilot plan to produce unconventional gas in the San Jorge Gulf Basin.
Preliminary results exceed expectations, putting Chubut back on Argentina’s energy map as a potential new shale gas hub, complementing the Vaca Muerta formation.
What shale gas is and why it’s different
Shale gas is natural gas that has been trapped for millions of years within the same rock that generated it: very fine, hard clay and shale layers with low porosity and nearly zero permeability (less than one millionth of a darcy). Unlike conventional gas, which accumulates in porous pockets and flows easily, shale gas is literally bound or locked in the source rock.
To produce it commercially, operators drill horizontal wells 2,000 to 4,000 meters long and fracture the rock in dozens of stages, injecting water, sand, and small amounts of chemicals at pressures exceeding 600–700 bars.
Each fracture creates an artificial network of channels that allows the gas to flow to the well. A single modern well can produce between 3 and 15 billion cubic feet of gas over its estimated ultimate recovery (EUR), although most production occurs in the first two to three years.
December tests: promising flows and technical validation
Flowback operations, the process of releasing the fluid injected during hydraulic fracturing so gas can begin to flow, began Dec. 2 on the second pilot well, drilled in November.
According to preliminary PAE data, initial flows range from 1 to 2 million cubic feet per day (MMscf/d) per well, exceeding conservative projections of 0.5–1 MMscf/d. These rates, measured during the first 72 hours of controlled testing, indicate high productivity in the D-129 formation, with stable reservoir pressures and low water content (less than 20% in initial flowback).
This well, with a nearly 3,000-meter lateral and 25 fracture stages, validates shale gas feasibility in a mature basin. PAE reports that the gas is dry (more than 90% methane), ideal for local markets or export. Testing will continue over the coming weeks to evaluate decline rates — expected at 60–70% annually initially — and estimate recoverable reserves, projected at 3–5 billion cubic feet (Bcf) per well.
Growing confidence in Chubut’s shale development
Marcos Bulgheroni, PAE’s CEO and a leading force behind the project since its April announcement, reinforced optimism about December’s progress. In a late November interview with local media, he said: “We have managed to understand the pressure, organic content, and characteristics of the shale. This is the first step toward something much bigger,” referring to Cerro Dragón’s potential as an unconventional hub.
At the concession’s conversion ceremony, Bulgheroni highlighted PAE’s historic commitment to the basin: “For 70 years, we have invested steadily in the San Jorge Gulf. Our work has made Cerro Dragón the country’s largest conventional hydrocarbon-producing area. Today, we are the first to explore the basin with a shale focus, and we are confident we can develop it.”
Bulgheroni also emphasized synergies with existing production: “Although Cerro Dragón is no longer the top-producing field, we continue to invest in this basin with a new development approach. This field is our home, and we will keep dedicating time and resources to it.” If upcoming tests continue to confirm economic viability, a new wave of investments in the basin could follow.
The pilot, launched after the confirmed April 2025 discovery, includes a total of five wells and an investment exceeding $250 million. The first well, completed in 2024, laid the groundwork, but December marked the start of actual production. At the same time, PAE installed 17 polymer injection plants to enhance recovery in adjacent conventional reservoirs, integrating the new shale gas into existing operations.
Impact and challenges
These results could raise Chubut’s production by 15% in 2026, generating hundreds of jobs and $90 million in royalties over five years. PAE emphasizes sustainable practices: reusing 70% of fracturing water, capturing methane through “green completions,” and electrifying equipment to reduce emissions.
Chubut Gov. Ignacio Torres celebrated the progress: “December’s tests confirm that Cerro Dragón is not in decline and could mark the start of a new shale era in the south.” If confirmed, the project could move to full-scale development in 2026, revitalizing the basin and supplying Patagonian gas to LNG projects in Río Negro.