As ink dries on signed license off Uruguay, search for partners coming up soon

Isle of Man-headquartered oil and gas player Challenger Energy Group (CEG) has formally signed a license for a shallow water exploration block off the coast of Uruguay. Aside from embarking on technical work, the firm intends to go on the lookout for partners to enable an early farm-out.

After Challenger Energy submitted a bid for the AREA OFF-3 block offshore Uruguay as part of the Open Uruguay Round, the first instance of 2023, the Administración Nacional de Combustibles Alcohol y Pórtland (ANCAP), the Uruguayan national regulatory agency, awarded the license for the block to the company in July 2023.

This enabled the firm to expand its footprint in Uruguay to two blocks in the offshore Punta del Este and Pelotas sedimentary basins: AREA OFF-1 and AREA OFF-3. As Challenger has confirmed the formal signing of the AREA OFF-3 license, signed in Montevideo on March 7, the first exploration period will begin on June 7, 2024, and run for four years, until June 6, 2028.

Covering an area of 13,252 km² located in relatively shallow water depths from 20 to 1,000 meters around 100 km off the Uruguayan coast, the block is said to have substantial existing 2D and 3D seismic coverage, with two previously identified material prospects possessing currently estimated gross resource potential of up to 2 billion barrels of oil and around 9 trillion cubic feet of gas.

Furthermore, Challenger’s minimum work obligations on the AREA OFF-3 block during the initial exploration period entail licensing and reprocessing of 1,000 km of legacy 2D seismic data and undertaking two geotechnical studies. The firm intends to follow a similar strategy to the one adopted for the AREA OFF-1 license, which included the farm-out to Chevron.

Eytan Uliel, Chief Executive Officer of Challenger Energy, commented: “Following on from our recently announced farm-out of the AREA OFF-1 licence to Chevron (pending regulatory approvals), we are very pleased to announce that the AREA OFF-3 licence has now been formally signed, cementing Challenger Energy’s position as a significant industry participant in Uruguay’s offshore.”

According to Challenger, it plans to accelerate its technical work program, including additional discretionary work, with the objective of high-grading existing prospects, identifying new plays and prospects, and ultimately introducing a strategic partner at an early stage.

Uliel added: “AREA OFF-3 represents a successful expansion of the company’s business in Uruguay, a country that has fast become one of the world’s frontier exploration hotspots. We believe that AREA OFF-3 has strong technical merit and offers an exciting value-creation opportunity. Therefore, like with AREA OFF-1, our immediate strategy for AREA OFF-3 is to commence accelerated technical work, in support of seeking an early farm-out”.

While there are no prior wells, considerable seismic activity was carried out on the AREA OFF-3 block, comprising approximately 4,000 km of legacy 2D and around 7,000 km of 3D, as part of the 2012 proprietary acquisition by BP and seismic vendor, PGS. Two material-sized prospects have previously been identified and mapped on the block.

The first prospect, Amalia, comes with a gross resource estimate: P10/50/90 (ANCAP) of 2,189, 980, and 392, respectively. This prospect straddles the boundary with Shell’s AREA OFF-2, with an estimated 30% of the prospect contained within AREA OFF-3. The second prospect, Morpheus, entails a gross resource estimate: P10/50/90 (ANCAP) of 8.96, 2.69, and 0.84, respectively. This prospect is entirely contained with AREA OFF-3.

While the AREA OFF-3 block is adjacent to the AREA OFF-2 block held by Shell to the west, with the Amalia prospect straddling both the AREA OFF-2 and AREA OFF-3 blocks, the block is adjacent to the Brazilian maritime border to the east, an area that was subject to considerable licensing in December 2023, with thirteen nearby Brazilian blocks licensed variously to Chevron, Shell, CNOOC, and Petrobras.

In addition, the block is adjacent to two deepwater Uruguayan blocks to the south: AREA OFF-6, held by APA Corporation, and AREA OFF-7, held by Shell. The AREA OFF-3 block was previously held by BP but was relinquished in 2016. Challenger highlights that recent conjugate margin discoveries offshore Southwest Africa have triggered renewed interest in the types of plays present in Uruguay.

This is related to the data and enhanced technical understanding from recent discoveries offshore Namibia, such as TotalEnergies’ Venus and Shell’s Graff and Jonker, which offer greater confidence that the regional petroleum system charging those discoveries is likely to be present offshore Uruguay.