Uruguay's offshore draws oil and gas prospectors
Uruguay's offshore draws oil and gas prospectors
Sandwiched between hydrocarbon giants Brazil and Argentina, Uruguay produces just 900 barrels of oil per day, according to the US 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 program.
The program includes drilling an ultra-deep water exploration well, 33,000 square kilometers of three-dimensional seismic surveys and 13,000 square kilometers of electromagnetic surveys, according to the government.
Previous exploration in the 1970s and 1980s, including 12,000 kilometers 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 meters of water off the Atlantic coast.
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 meters. 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 them.
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.
— John Kemp is a Reuters market analyst.
The views expressed are his own.
Brent crude oil rises for a sixth day as supplies tighten amid strong demand
- US West Texas Intermediate crude futures were at $68.98 a barrel, up 34 cents
- The potential of renewed US sanctions against Iran is pushing prices higher
SINGAPORE: Brent crude oil rose for sixth day on Tuesday, passing $75 a barrel, on expectations that supplies will tighten because fuel is rising at the same time the US may impose sanctions against Iran and OPEC-led output cuts remain in place.
Brent crude oil futures climbed to as high as $75.20 a barrel in early trading on Tuesday, the highest since Nov. 27, 2014. Brent was still at $75 a barrel at 0311 GMT up 29 cents, or 0.4 percent, from its last close.
Brent’s six-day rising streak is the most since a similar string of gains in December and it is up by more than 20 percent from its 2018 low in February.
US West Texas Intermediate (WTI) crude futures were at $68.98 a barrel, up 34 cents, or 0.5 percent from their last settlement. On Thursday, WTI rose to as high as $69.56, the most since Nov. 28, 2014.
Markets have been lifted by supply cuts led by the Organization of the Petroleum Exporting Countries (OPEC) which were introduced in 2017 with the aim of propping up the market.
The potential of renewed US sanctions against Iran is also pushing prices higher.
Stephen Innes, head of trading for Asia/Pacific at futures brokerage OANDA said new sanctions against Tehran “could push oil prices up as much as $5 per barrel.”
The US has until May 12 to decide whether it will leave the Iran nuclear deal and re-impose sanctions against OPEC’s third-largest producer, which would further tighten global supplies.
“Crude prices are now sitting at the highest levels in three years, reflecting ongoing concerns around geopolitical tensions in the Middle East, which is the source of nearly half of the world’s oil supply,” ANZ bank said.
“Oil strength is coming from Saudi Arabia’s recent commitment to get oil back up to between $70 to $80 per barrel as well as inventory levels that are back in the normal range,” said William O’Loughlin, investment analyst at Australia’s Rivkin Securities.
OPEC’s supply curtailments and the threat of new sanctions are occurring just as demand in Asia, the world’s biggest oil consuming region, has risen to a record as new and expanded refineries start up from China to Vietnam.
One of the few factors that has limited oil prices from surging even more is US production, which has shot up by more than a quarter since mid-2016 to over 10.54 million barrels per day (bpd), taking it past Saudi Arabia’s output of around 10 million bpd.
As a result of its rising output, US crude is increasingly appearing on global markets, from Europe to Asia, undermining OPEC’s efforts to tighten the market.