MercoPress. South Atlantic News Agency

Offshore oil exploration in Uruguay to begin next January

Petrobras and Repsol-YPF bid for the two most promising blocks

Brazil's government managed oil and gas corporation Petrobras and Repsol-YPF have been awarded a contract to explore for natural gas and oil off Uruguay's coast announced the country’s oil firm Ancap.

Uruguay opened a tender for companies to drill 11 blocks of up to 8.000 square kilometres, but only offers for the two most promising blocks were received. Blocks 3 and 4 are 340 and 210 kilometres offshore Punta del Este

“If the government approves the recommendation, the contracts will be signed in about a month,” ANCAP chairman German Riet told reporters, without putting a figure on how much each company would spend.

Petrobras and Repsol-YPF presented their exploration proposal as a consortium but each company will explore one block. The auctions were part of the so called “Uruguay Round 2009”.

If the drilling leads to the discovery of commercially viable reserves of oil or natural gas, the government will negotiate with the companies to secure a role for Ancap in an eventual production operation.

Preliminary seismic surveying off the country's Atlantic coast has raised hopes of energy independence for Uruguay, which imports a million barrels of crude every three weeks.

According to the shared production contract the contracting company is responsible for all risks and costs. The eight year exploration contract is divided in three phases of 4, 2 and 2 years.

Once the contract is signed exploration begins in January 2010. During the first four years the companies will have to survey and search for areas where to drill exploratory wells and during the fifth and sixth year effective drilling must take place. If the contractors wish to extend their licences, they will have to drill more wells in the seventh and eighth year.

The only previous experience in the area dates back to 1976 when Chevron surveyed the area and drilled an only exploratory well with traces of natural gas. Discrepancies with the Uruguayan authorities of the time put an end to the whole operation.