Uruguay: Agreements are closed for the exploration of hydrocarbons on the high seas

Inspenet, December 21, 2023.

Hydrocarbon exploration: a milestone for Uruguay

Uruguay’s state energy company, ANCAP , has achieved a significant achievement by signing contracts for four deepwater blocks with three oil and gas companies. This is carried out in the context of the Open Uruguay Round, which has been in force since 2019.

With these agreements, Shell of the United Kingdom, APA Corporation of the United States and the Argentine oil company YPF have the authorization to begin the exploration and, eventually, the exploitation of oil resources on the South American coast.

By signing these contracts, the three companies express their commitment to the search for oil reserves in the waters of Uruguay, marking the beginning of a new phase of hydrocarbon exploration in the country’s four offshore exploration licenses. These areas include OFF-6 (APA), OFF-2 and OFF-7 (Shell), and OFF-5 (YPF). With this step, the exploratory period of these blocks begins, aligned with the energy transition strategy promoted by ANCAP.

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According to ANCAP, the contract model for exploration and production, approved in the Open Uruguay Round, is based on a production sharing agreement (PSA), a format widely used in the oil and gas industry.

The agreement is valid for up to 30 years , covering both the exploration period and eventual production. The initial exploration phase covers four years, during which companies must meet certain commitments to be eligible for a possible extension.

Notably, the newly signed licensees have undertaken longer minimum work programs with higher estimated costs compared to those applied to Challenger’s OFF-1 and OFF-3 blocks during the initial exploration period.

The formalization of these license contracts paves the way for companies specialized in seismic acquisition to begin the processes of obtaining permits and approval of possible 3D seismic acquisition programs in Uruguay. Subject to necessary permits and approvals, it is anticipated that a study could be carried out towards the end of 2024 or early 2025.

The APA – Shell consortium plans to carry out a 3D seismic study of 2,500 km² in the OFF-4 block, with a total committed investment of approximately 130 million dollars.

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Source: worldenergytrade.com