Chevron Places a Bet on Uruguay's Offshore O&G Frontier

While it feuds with ExxonMobil over partnership rights off Guyana, Chevron has completed a deal to buy into Uruguay's nascent offshore sector. The oil industry sees strong potential in geological formations off the coast of Uruguay, and Chevron has placed a substantial bet on its future.

Chevron has reached a deal to take a 60 percent operating stake in Challenger Energy's OFF-1 license, about 50 nautical miles off Uruguay. Chevron is paying $12.5 million up front, plus the full cost of a seismic campaign to evaluate the lease area. If the partners decide to drill an exploration well, Chevron will cover half of Challenger's share of the cost. 

"We firmly believe that AREA OFF-1 holds enormous potential, and this farm-out is strong validation of the high-quality technical work CEG has done to-date," said Challenger CEO Eytan Uliel in a statement. 

The deal fulfils Challenger's long-term plan to farm out development of OFF-1. The firm still owns 100 percent of the nearby OFF-3 block. 

Petroleum geologists believe that the formations off Uruguay's coast bear similarity to recent discoveries in a frontier area off Namibia, where TotalEnergies found five billion barrels of oil in its Venus discovery in February 2022. Early investors in Uruguay include APA, YPF, Shell, in addition to Challenger, and a multiparty 3D seismic campaign is expected late this year or early in 2025.  

Chevron's other major investment in South America's offshore sector has gone less smoothly, though the American supermajor still expects to prevail. ExxonMobil has filed an arbitration case to prevent Hess from selling a crown jewel - its 30 percent non-operating stake in the prolific Stabroek Block off Guyana - to Chevron. Hess' Guyana holdings are a substantial part of the reason that Chevron has offered to buy the firm for $53 billion, and the case may delay the closing of the deal.