Challenger Energy Group PLC (AIM:CEG, OTC:BSHPF) highlighted that almost all exploration acreage offshore Uruguay has now been sewn up, mostly by majors, which is a boon to its early mover advantage in the emerging exploration frontier.
The company, in a statement, noted that Uruguay’s national energy company ANCAP announced the award of two acreage packages to a Shell-led consortium and Argentina’s YPF respectively, following competitive bidding.
A consortium including Shell and APA, formerly Apache Energy, landed the Area OFF-4 deepwater block which lies immediately adjacent to Challenger’s shallow-water Area OFF-1 acreage – with ANCAP noting that the successful bidders committed to an extensive programme of work including 3D seismic acquisition.
YPF was awarded Area OFF-5 which is also a deep-water block, and, it similarly committed to an extensive technical work programme.
They follow the awards in May 2022 to Shell (Area OFF-2 and Area OFF-7) and APA (Area OFF-6).
Altogether the aggregate commitments made by the 2022 entrants are estimated by ANCAP to be in excess of US$230mln, according to Challenger Energy.
Challenger secured its Uruguay acreage, OFF-1, in May 2020.
"In 2020, Challenger Energy successfully bid for the AREA OFF-1 block in Uruguay, and in so doing strategically gained first mover status offshore Uruguay. We were able to secure the block with a modest initial work commitment, which we are already well advanced to completing, considerably ahead of schedule,” said Challenger chief executive Eytan Uliel in the statement.
“Subsequently, in May 2022, three more blocks were awarded in a contested open round, to Shell (two blocks) and Apache (one block). Now, a further two blocks have been awarded in Uruguay in another contested open round, to each of a Shell-APA consortium and YPF, and YPF with partner Equinor is also poised to commence 3D seismic acquisition in a neighbouring block in Argentina," he added.
Uliel noted that “this means that almost all available offshore acreage in Uruguay has now been taken up, and apart from Challenger Energy, all by majors and NOCs who have committed to very sizeable work programs."
“This dramatic increase in interest in Uruguay and the neighbouring region is directly related to the very sizeable discoveries made in the conjugate margin Orange Basin in early 2022, and through the course of 2023 we hope to move forward with a farm-in, so as to capitalise on that increased interest and allow for accelerated work on our block," he concluded.
Challenger noted that it is presently in Year 1 of its initial four-year exploration period (which was adjusted due to the impact of the COVID-19 pandemic), though it expects to substantially complete all work required under its license commitments during the first half of 2023, well ahead of schedule.
The company highlighted that it estimates resource potential exceeding 1.5bn barrels of oil equivalent, based on its mapping efforts which have envisaged multiple exploration plays and leads in relatively shallow waters. It noted that these estimates are corroborated by formal resource estimates provided by ANCAP, which see 1.35bn barrels as a P50 expected ultimate recoverable resource. Moreover, it highlights the potential for “significant upside running room”.
Challenger’s plan in Uruguay is to seek a farm-in partnership in the near-term, to support an accelerated work programme on the OFF-1 Block.