BMI View : Drilling by Schuepbach and Petrel in the Piedro Sola block could determine Uruguay's shale resource potential. If commercial discoveries are made, it would be a boon to the import-dependent country as it seeks to build up a domestic upstream industry to boost its energy security.
Uruguay could determine its shale resource potential when onshore exploration drilling takes place in the Piedro Sola block, lying north west of the country. US-registered Schuepbach and its partner Petrel Energy will drill a well in May/June 2013, targeting the Cordobes shale and Cerrezuelo and La Paloma sandstone formation in Piedro Sola.
This block is locate d within the Norte Basin, which extends into oil- producing regions in Brazil, Bolivia and Argentina. According to Petrel, existing data suggest that there is a proven hydrocarbon-producing source rock in the basin with high-quality reservoir sands. It has compared the shale formation in the Norte Basin to the Bakken and Eagle Ford formations in the US. Like Bakken and Eagle Ford, the Cordobes shale formation is Devonian-age and could be more oil- and liquids-prone than gas.
Piedro Sola is one of two blocks awarded to Schuepbach by Uruguay an state-owned ener gy company Ancap in production sharing contracts (PSC) signed in February 2012. Under the contracts, the US-registered firm is committed to a three-year exploration period that is to cost an estimate of US$10mn. If proven commercial, Schuepbach is entitled to a 25-year development and production contract that can be extended for another 10 years. Australia-based Petrel Energy farmed-in to these concessions in October 2012, taking a 25% interest in both.
Another Shale Search
Schuepbach's search for Piedro Sola's shale potential will be closely watched. According to a 2011 US Geological Survey (USGS), the Cordobes Formation in the Norte Basin could hold about 1.0bn barrels (bbl) of mean prospective undiscovered liquids and 374bn cubic metres of gas.
If proven commercial, it would be a big boost for Urugua y, which currently has negligible proven oil and gas reserves. The country is dependent on imports for its energy needs, given that it does not produce any gas and produced only 1,200 barrels of oil per day (b/d) to meet its 39,000b/d consumption needs in 2012.
|Filling Domestic Needs|
|Uruguayan Oil Production, Oil Consumption (LHS, '000b/d) & Natural Gas Consumption (RHS, bcm), 2002-2011|
Looking For (Black) Gold
Uruguay has in recent years increased efforts to woo investors to its upstream. Although it has negligible domestic production, the country is under-explored. On the back of large offshore discoveries made in Brazil, the country hopes that Brazilian success will boost interest in its virgin waters as well. Its second licensing round, which offered offshore blocks and concluded in March 2012, saw reasonable success. Winners of the deepwater blocks put on auction included big names ranging from supermajors BP and Total to Tullow Oil . Exploration work on these offshore blocks is thought to have begun, though they are mainly at the seismic survey stage. It will take a while before any concrete exploration results are announced.
Onshore exploration by Schuepbach and Petrel of Uruguay's shale resources will support ongoing offshore activity as the country seeks to build up a domestic upstream industry to increase its energy security. This will help improve the country's long-term balance of payment s position if it can reduce its oil and gas import requirement.