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Is This The Next Offshore Sweet Spot For Big Oil?

Is This The Next Offshore Sweet Spot For Big Oil?

France’s Total SA is searching for an “elephant” oil field off the coast of Uruguay.

Uruguay does not have much of an offshore oil industry. But the Pelotas Basin, where Total is focusing, is starting to garner more interest. It borders Brazil and there is speculation that both countries have large oil fields sitting off of their coasts. A group of international oil companies including BP, Tullow Oil, Total, and BG Group have collectively invested over $1 billion in exploration in Uruguay since 2012.

The original interest in Uruguay came when oil prices were near or above $100 per barrel. That brought international companies to a country without an oil and gas track record. The collapse in oil prices put a damper on the excitement. Related: Why Saudi Arabia Has No Intention To End The Oil Glut

But Total thinks that it could not only find some oil worth producing, but that it could discover a huge oilfield. "There could be an elephant out there. This is what we’re chasing," Christian Tichatschke, head of exploration for Total’s Uruguay unit, told Bloomberg. "It’s a very risky project but we believe we can find something."

Total is only a few weeks away from drilling a well that could not only put Uruguay on the map, but also open up a play that it shares with Brazil, a play that most oil companies shunned last year when Brazil tried to auction off tracts. "We actually don’t have any discoveries in this area and this could be a play opener. This means it could be a first discovery that leads to a lot more discovers," Tichatschke said. The project will be Uruguay’s first offshore well drilled in over 40 years. Related: Exposing The Oil Glut: Where Are The 550 Million Missing Barrels?!

Even if Total is successful, it will be years before oil will begin flowing. The company says that first oil won’t come before 2021.

A discovery that leads to production would be a boon for Uruguay, a country that imports all of its oil and gas supplies.

By Charles Kennedy of Oilprice.com

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