Uruguay reveals candidates for licensing round

Six companies, including national oil firms, expressed interest in acquiring acreage under Uruguay's first offshore licensing round.

May 13th, 2009

Uchenna Izundu
OGJ International Editor

HOUSTON, May 13 -- Six companies, including national oil firms, expressed interest in acquiring acreage under Uruguay's first offshore licensing round.

The candidates include BHP Billiton Ltd., Galp Energia, SGPS SA, Petroleos de Venezuela SA, Petroleo Brasileiro SA, Pluspetrol SA, and YPF SA.

Despite the low number, Administracion Nacional de Combustibles, Alcoholes y Portland (Ancap), Uruguay's national oil company, said it is satisfied with the results considering low oil prices, the global economic slowdown, and the impact on the oil industry with operators reducing their budgets and suspending or canceling projects.

Ancap will assess the prequalification applications, and those that are successful will be able to bid for the 11 blocks in the Punta del Este, Pelotas, and Oriental del Plata basins. Companies can place one bid on a block and Ancap will sign one production sharing agreement for each block. Each PSA will be for 30 years plus a maximum 10-year extension. Companies do not have to pay production or signature bonuses.

Ancap said the licensing round offered promising geology, a secure investment regime, and suitable contract terms in the present industry context. The blocks cover areas of 4,000-8,000 sq km and lie in 1,000-3,000 m of water.

The licensing round was launched in December and the qualification period will end May 15. Offers for blocks will run from June 14 to July 1.

Uruguay was forced to revise its contract terms last month: it has removed the mandatory requirement to drill an exploration well during the 4-year exploration period for A-classified blocks. These are blocks 3,4,5, and 7. However, operators are still free to include exploration wells in their work program.

Ancap also increased the contract guarantee percentage from 5% to 10% for the minimum exploration program for the A blocks. This means all the blocks will have the same requisites for guarantees and minimum exploration programs.

In 1976, Chevron drilled the last well off Uruguay. Uruguay has spotted over 100 seismic leads in tertiary extensional and toe thrust areas.

Contact Uchenna Izundu at uchennai@pennwell.com.

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