Energy giants place tentative bets on oil finds in Uruguay

Uruguay state-run energy firm Ancap is set to agree to final terms for a record number of seven offshore exploration licenses next month, a senior executive told Reuters, as the frontier market lures bets from global players like Shell.

To date no oil or gas has been found in Uruguayan waters, but the licenses have nonetheless drawn tentative interest from energy majors as recent discoveries in Namibia, on the direct opposite side of the Atlantic, have stoked hopes of similar finds off South America.

"Geologists believe 120 million years ago Namibia was linked to Uruguay, before the breakup between Africa and South America," said Santiago Ferro, who oversees energy transition at Ancap, which is involved in the licensing process.

"So they share the same geological history, like a mirror image."

Uruguay remains "frontier, wildcat exploration," Ferro conceded, but he said the potential could be significant.

"If a couple of discoveries are made, it would not be a surprise if the recoverable resources are billions of BOE (barrels of oil equivalent)," he said, adding it was likely any energy finds would be more weighted towards gas than in Namibia.

Ferro said that for the first time all seven offshore blocks - which lie some 100-300 kilometers (62-186 miles) from Uruguay's coast - will have international firms carrying out exploration work. He said the contracts are set to be finalised with Ancap by mid-October, a timeline that has not previously been disclosed.

Shell, Argentina's YPF and Houston-based APA Corp are among the companies awarded licenses. Ancap estimates the potential oil and gas in place is around 20 billion barrels.

"If there is a discovery, Uruguay can start to estimate production targets," Ferro said. Ancap expects the first exploratory offshore well from this licensing round to be drilled before the end of 2027.