Amerisur Resources said it has spudded a well in eastern Paraguay.
The company said the work on the Jaguarete-1 well in the San Pedro block within the Parana basin will be carried out using the Quieroz Galvao QG-1 drilling rig.
Jaguareté-1 is expected to take approximately 40 days to drill to an estimated total depth of 10,000ft.
It is targeting the Santa Elena and Lima formations of Devonian age and carries prospective resources of 106 million barrels of oil.
A spokesman said:”We are delighted to have commenced the drilling of Jaguareté-1 in the San Pedro block, the first exploration well in our active, fully funded 2016 work programme.
“Jaguareté-1 is an exploration well which carries risk in this new basin. I look forward to an efficient execution of the programme and hope for positive results.
“The well, on success has the potential to open up a new petroleum province in a country where Amerisur holds an attractive acreage position of approximately 4.8 million hectares covering four 100% owned oil and gas permits.
“Our work to date suggests that all necessary conditions are present for a commercial hydrocarbon discovery in our blocks in Paraguay and we look forward to updating shareholders in due course on the results.”