By John Kemp
LONDON Nov 15 Four of the world's most
successful oil and gas exploration companies last month signed
contracts to invest more than $1.5 billion over the next three
years in prospecting for fossil fuels off the coast of Uruguay,
betting that geological conditions which produced deposits off
the West African coast are replicated on Uruguay's continental
Sandwiched between hydrocarbon giants Brazil and Argentina,
Uruguay produces just 900 barrels of oil per day, according to
the U.S. Energy Information Administration (EIA). It imports
nearly all the crude used in its lone refinery at Montevideo as
well as refined products.
But on Oct. 5, Uruguay's state petroleum company ANCAP
signed exploration agreements for eight offshore blocks with BG
Group (3 blocks), BP (3 blocks), Total
(1 block) and Tullow (1 block) that committed the
companies to an expensive surveying programme.[ID: nL2E8EU7U2]
The programme includes drilling an ultra-deep water
exploration well, 33,000 square kilometres of three-dimensional
seismic surveys and 13,000 square kilometres of electromagnetic
surveys, according to the government.
Previous exploration in the 1970s and 1980s, including
12,000 kilometres of two-dimensional seismic survey lines,
failed to produce commercial discoveries. But the companies are
hoping improvements in surveying will enable them to locate
large deposits of oil and gas in 500-2,000 metres of water off
the Atlantic coast.
Uruguay Round II:
Offshore license areas:
Total exploration case:
BP exploration case:
BG Group exploration:
Until the two continents were forced apart by a rift down
the centre of what became the Atlantic Ocean, Latin America's
east coast was joined to the west coast of Africa.
Exploration in the string of giant sedimentary basins along
the West African coast (Niger Delta, Cameroon, Gabon, Congo,
Kwanza, Mocamedes, Walvis and Orange River) has resulted in
series of major oil and gas discoveries.
Explorers are betting that the matching basins off the east
coast of Latin America (Bahia Sul, Espirito Santo, Campos,
Santos, Pelotas, Oriental del Plata, Punta del Este, Colorado
and Malvinas/Falkland) have a similar geological structure and
contain an equally attractive amount of hydrocarbons.
It is a strategy Total calls "the mirror concept".
Huge oil deposits have already been discovered in the
pre-salt formations of the Campos and Santos basins off Brazil.
The sedimentary basins to the south, off Uruguay, also
appear to have strong oil- and gas-producing potential. The
post-rifting sedimentary layers have a total thickness of
2,500-4,500 metres. Greater thickness improves the chances that
hydrocarbons will be found in significant quantities.
During the licensing round, ANCAP's geologists also
highlighted the thickness of many of the pre-rifting layers,
laid down in the same environment as the basins off West Africa,
before the two continents were separated.
They have the greatest similarity to offshore areas of
Nigeria and Angola, such as the Bonga, Nnwa Doro and Dalia oil
fields, where large volumes of oil have been found.
Pre-rift sedimentary layers include thick shales deposited
on the floors of ancient seas and lakes, similar to those off
West Africa or the coast of Brazil, with a high organic content:
ideal for generating oil and gas.
It is this massive hydrocarbon potential that makes the area
attractive to prospectors such as BG, BP and Total.
Total described the bidding round as "very competitive". It
has undertaken to start 3D seismic surveying before the end of
the year and to drill its first well in 2014.
NO OIL BEFORE 2020
Potential is not the same as finding suitable structures
that have trapped oil or gas in big enough quantities to make it
worth drilling costly offshore wells in deep water to extract
The exploration companies are committed to conducting
seismic and/or electromagnetic surveys between Q4 2012 and 2014.
It is far from certain any of the blocks will yield
commercial discoveries. Even if they do, the first oil or gas
production is likely to be five to 10 years away.
Fields are generally discovered one to three years after the
start of detailed geological and geophysical exploration.
Development and the start of production generally occur five to
11 years after discovery.
So even if Uruguay's offshore basins contain commercial
volumes of oil and/or gas, and that is a big if, production is
unlikely to start before 2020.
Nonetheless, the search in the deepwater off the coast of
Uruguay is another example of how high oil prices have provided
the major international companies with both the cash and the
incentive to go hunting on new frontiers.
It adds to the enormous amount of exploration and
development activity taking place, mostly away from the Middle
East and much of it Africa and the Americas, which is gradually
shifting the geographical balance in the oil market.