Challenger Energy (CEG) , a Caribbean and Americas-focused oil and gas producer, issued an update related to its Uruguayan offshore portfolio (see map below).
Challenger said it has submitted geotechnical reports for AREA OFF-1 to Uruguayan regulator ANCAP as part of its minimum work programme obligation. Subject to final ANCAP review and approval, Challenger has now fully discharged its minimum work programme obligations for the first exploration period of its AREA OFF-1 licence, which runs until August 2026.
On December 12 2023, contracts for the awards of 4 offshore licences in Uruguay - AREAs OFF-2, OFF-5, OFF-6 and OFF-7, to Shell, YPF and APA Corporation - were executed at a group signing ceremony in Montevideo. The signing of the contract for AREA OFF-4 (an APA-Shell consortium block, adjacent to Challenger's AREA OFF-1) is expected shortly.
ANCAP has indicated that the signing of the contract for Challenger's AREA OFF-3 licence - the last remaining block in Uruguay awarded to Challenger in May 2023 - is expected soon after the signing for AREA OFF-4.
The finalisation of the contracts paves the way for seismic acquisition companies to commence permitting and approval for 3D seismic acquisition programmes in Uruguay, with a survey expected in late 2024 or early 2025.
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An eventful week for Uruguay offshore exploration as contracts were signed, or expected shortly, for multiple offshore blocks with industry heavyweights, solidifying extensive exploration programmes in the area over the next few years, with a 3D seismic shoot expected in 2024/25. Challenger stands out as a smaller player in the space that nevertheless holds two large blocks in the area - AREA OFF-1 and AREA OFF-3. For the former, the company has begun a farm-in process, expected to conclude in Q1 2024.
It should be noted the minimum work programmes committed to by the other signed licence holders for the initial exploration periods of their licences is significantly greater in work scope and cost than is applicable to Challenger's AREA OFF-1 and AREA OFF-3 blocks. For the other licence holders, it will include 3D seismic acquisition and reprocessing, and in the case of APA Corporation's OFF-6 block, one deepwater exploration well.
Industry interest in Uruguay increased substantially following large discoveries made in offshore southwestern Africa in 2022. Challenger then quickly emerged as a major participant in this new global exploration hotspot. AREA OFF-3 is located in relatively shallow water and has a current estimated resource potential of up to ~500 Mmboe and up to 9 trillion cubic feet gas from multiple exploration plays. As the block was held by BP until 2016, Challenger is inheriting significant modern 2D and 3D seismic, in particular 7,000km2 of 2012 vintage 3D seismic. Challenger expects the cost of the programme during its initial 4-year exploration period to be low at approx. US$100k/year.
The completion of Challenger's minimum work programme for the initial exploration period of AREA OFF-1, the finalisation of contracts with global majors for the other blocks, and unlocking the ability of seismic vendors to progress 3D seismic acquisition programmes in Uruguay, are all significant milestones that should benefit Challenger's farm-in process for AREA OFF-1 where a 1-2 billion BBOE resource has been identified.
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