In recent years, Uruguay has turned its attention to making a name for itself as one of the many South American countries with oil reserves. However, the process is still dominated by uncertainty.
The small South American country of around three million people, internationally renowned for its impressive achievements in the world of football and the high quality of its cattle, is now seeking to carve a niche for itself in the competitive hydrocarbon industry.
Having embarked on this path in 2012 with its first international treaties, in January 2015 the Administración Nacional de Combustibles, Alcohol y Pórtland (National Administration of Fuels, Alcohol and Portland Cement, Ancap) announced the existence of 20 potential oil wells on Uruguayan soil – specifically, in the Salto and Tacuarembó regions.
The US firm Netherland Sewell & Associates analysed and certified the quantity of crude oil that could be extracted and the results were fairly encouraging.
Ancap announced that Australian company Petrel would be responsible for determining whether or not there was oil in the 20 traps. If so, it would be the only firm authorised to extract it.
Pursuant to articles three, four and five of the Uruguayan Mining Code, class I mineral deposits are the inalienable property of the nation, which means that the extraction company would only benefit from a mere 20 percent of the resulting profits.
But despite these regulations, a few months after announcing the start of this exploration – and the Australian company’s exclusive rights – French company Total threw its hat into the ring by announcing its intention to sink the world’s deepest oil well beneath Uruguayan waters (works began in March 2016).
Total must drill a shaft 6,400m deep (3,400m of water and another 3,000m below sea level), located just 400m from the coast of Montevideo; the project will cost approximately $200m and be funded by the company itself.
Nevertheless, French company Total and Oceanian company Petrel are not the only players, as five contracts are currently in force pertaining to the maritime platform: three with the multinational BG (Shell), one with Total in partnership with ExxonMobil and Statoil, and the fifth with a consortium comprising Tullow Oil, Inpex and Statoil.
It is not unreasonable, therefore, to deduce that this is a very profitable business, considering the quantity of capital that multinationals are splurging on a high-risk venture. However, more than a year and a half since the news first broke regarding the exploration, what is certain is that oil (the so-called “black gold”) has yet to be seen on Uruguayan soil.
On 22 August the Council of Ministers analysed Total’s conclusions in respect of exploration at the maritime platform and announced that it would go ahead with country-wide exploration. The Executive Branch also approved the principle of implementing a policy of regulating oil exploration throughout Uruguay.
“Exploration has been occurring for years, but now we have better technology and a greater level of interest in investing. This seems like a long-term policy that will yield results – otherwise, companies would not invest so heavily,” argued government minister Juan Roballo. For his part, the director of mining and geology, Néstor Campal, stated that the unsatisfactory findings of the research carried out by Total in the Raya-1 well (one of the fifteen zones still reserved for exploration) does not mean that there is no crude oil at the maritime platform.
Via a press release, Ancap stated that building a complete picture of potential offshore oil reserves would require more than a dozen exploratory boreholes.
The organisation also explained that its technical team had identified and assessed other zones with potential, and indicated that where oil companies and services are willing to invest venture capital testing them out, their commitment maintains the activity.
The minister for industry, energy and mining, Carolina Cosse, stated that both she and the President of the Republic, Tabaré Vázquez, were always very cautious in this regard and that this was a scientific issue that would be resolved through results.
(Traducido por Rosalyn Harvey)