The Maersk Venturer drillship, which is drilling the Raya-1 well that set a new world record in terms of water depth, and will determine the existence of commercially viable oil and gas reserves on Uruguay's continental shelf. Credit: Ancap

By Veronica Firme
MONTEVIDEO, Jun 9 2016 (IPS)

Uruguay is just weeks away from finding out if it will have a chance to stop being totally reliant on oil imports at some point in the future, when the first offshore exploration well in national waters – which set a new world record in terms of water depth – is completed.

Since Mar. 30, the consortium headed by France’s Total has been prospecting 250 km from the Atlantic coast, in more than 3,400 metres of water, and 3,000 metres below the seabed.

The Raya-1 well in Block 14, drilled with an investment of some 200 million dollars in ultra-deep waters on the continental shelf, is hunting for commercially viable oil or gas reserves.

On Thursday Jun. 8, the representative of Total in the country, Artur Nunes da Silva, said the drilling would be done in about two weeks and the samples would be sent to France for analysis. Only then, he said, would the results be announced.

The next day, the local media reported that, according to information from the industry, only water was found in Raya-1, although that did not fully rule out the existence of oil and gas on the continental shelf.

The drilling represents a major turning-point for this South American country of 3.4 million people, because it will soon know if it has a future as an oil producer. The effort to find oil here was not stalled by the oil-price crisis, which has discouraged investment at a global level, especially in high-risk ventures such as deepwater drilling.

“When the current drop in prices began, most of the contracts had already been signed,” Víctor Bacchetta, a journalist who specialises in environmental issues and who edits Uruguay’s Mining Observatory publication, told IPS.

The contracts form part of the goals set by the Ministry of Industry, Energy and Mining’s 2005-2030 energy policy, which, although it puts a priority on strengthening renewable energies, also paves the way for exploration and prospecting for oil and natural gas.

The state oil company Ancap is responsible for implementing the policy, which also requires attempts at participating in joint ventures for exploring deposits in other countries.

Geologist Ethel Morales told IPS that the first attempts to find fossil fuels in Uruguay dated back to the 1950s, when exploratory wells were drilled in the Northern Basin, which covers some 90,000 sq km in this country of 176,220 sq km.

A screenshot from a presentation by geologist Ethel Morales, showing the contracts granted so far on Uruguay’s continental shelf, to the right. The second from the top is Block 14, awarded to French oil major Total. Credit: Uruguay Round

Exploratory wells were also drilled on the continental shelf in the 1970s, said Morales, a professor at Uruguay’s University of the Republic. But shallow water prospecting ended in 1976, after two wells were declared dry.

Besides the energy policy itself, Morales said another factor that fuelled offshore exploration was the appearance of the so-called pre-salt deposits, located beneath a two-kilometre-thick salt layer under rock, sand and deep water, to the north of this country’s continental shelf, off the coast of Brazil.

These huge deposits drew the oil corporations’ attention to the South Atlantic. Morales said Brazil’s Santos basin, where the pre-salt deposits are located, and the Uruguayan basin “share the same origins,” although their later evolution was different.

In this context, Ancap began to search for partners to drill exploratory wells in Uruguayan waters, although its spokespersons stress that the chances of finding commercially viable reserves stand at just 15 percent.

Uruguayan Minister of Industry, Energy and Mining Carolina Cosse (3rd-left) with high-level officials from the state oil company Ancap, during their visit to the drillship that is exploring for oil in ultra-deep waters 250 km off the coast of Uruguay. Credit: Ancap

The Uruguay Round 1 bidding process was launched in 2009, offering continental shelf blocks, followed in 2011 by Round 2, in which eight contracts were signed, including the one with Total.

“Up to 2012 there was no 3D (tridimensional) seismic, and now we have nearly 40,000 sq km covered in the area of greatest prospectivity, which reflects a quantitative and qualitative leap with respect to the information available,” Ancap reported in late 2015.

Oil industry analysts stress the participation in the exploration here of the world’s leading oil companies, and note that the contracts assign a large proportion of the profits to the Uruguayan state.

Ancap and the Ministry of Industry decided to launch Uruguay Round 3, whose chief aim is the same: to determine whether there is oil and gas on the continental shelf, and if there is, whether it is commercially viable.

Total’s partners in Block 14 are the U.S. ExxonMobil (which has a 35 percent share) and Norway’s Statoil (15 percent), and the state will take 70 percent of the earnings, if the presence of light crude reserves is confirmed.

But even if the results from Raya-1 are positive, between two and three dozen additional wells will have to be drilled in the 6,900-sq-km block, and some six billion dollars will have to be invested if there is mainly oil, and 20 billion if there is mainly gas.

It could take up to six years before the start of commercial production of oil or gas, according to Total.

The oil companies granted contracts in the two bidding rounds held so far have invested a combined total of up to one billion dollars in exploration and prospecting.

The most important thing, in Ancap’s view, is that “after a period of nearly 30 years with no exploration” for fossil fuels, the oil companies are interested in investing in Uruguay, at their own expense and risk.

Edited by Estrella Gutiérrez/Translated by Stephanie Wildes

Since July 2014, Uruguay’s state power utility, UTE, has 30 100 percent electric vans. After the success of this initiative, it doubled that number in its fleet of vehicles, and incorporated two electric cars, in November 2015. Credit: Verónica Firme/IPS

By Veronica Firme
MONTEVIDEO, Nov 17 2015 (IPS)

Uruguay is modifying its energy mix with the aim of achieving carbon neutrality by 2030, by means of a strategy that bolsters non-conventional clean energy sources through public-private partnerships and new investment. A majority of this South American country’s energy already comes from renewable sources.

“By the end of 2014, this country’s energy mix was made up of 55 percent renewable sources, compared to a global average of just 12 percent,” said Ramón Méndez, the president of the National Climate Change Response System, during a meeting on renewable energy.

Furthermore, 94 percent of electric power comes from renewables, he said, in a country which is only responsible for 0.06 percent of all greenhouse gas emissions, which cause global warming.

The transformation of Uruguay’s energy mix began during the first term (2005-2010) of the current president, Tabaré Vázquez, although the country was not starting from zero in terms of renewable sources, Gonzalo Abal a physicist with the Solar Energy Laboratory of the University of the Republic of Uruguay, said in an interview with IPS.

Thanks to hydropower, a significant proportion of Uruguay’s energy already came from renewables. But hydroelectricity is vulnerable to the effects of climate change.

Traditionally, the country depended on four old hydroelectric dams, three of which were built on the Negro River between the 1930s and the 1970s. The fourth is on the Uruguay River, shared with neighbouring Argentina, and was built in the 1970s.

In addition, two ancient thermal plants powered by fuel oil have served as a back-up when the hydropower supply drops or collapses due to water shortages. The last time this happened was in 2004.

This Southern Cone country of 3.3 million people has fully exploited its large hydropower sources, and began to turn towards wind power and later biomass, the two clean energies around which the greatest progress has been made, according to data provided by the experts and documents consulted by IPS.

The transformation of the energy mix required a legal framework, which included authorisation for clients connected to the low voltage grid to generate electric power from renewable sources – wind, solar, biomass or mini-dams – with a potential of no more than 150 kilowatts.

Also approved were several initiatives like the 2005-2030 Energy Policy, or the 2015-2024 National Energy Efficiency Plan, adopted on Aug. 3.

The Energy Efficiency Plan is aimed at reducing energy consumption in all industries and sectors of the economy, but especially in residential areas and transportation, which will be responsible for 75 percent of the total accumulated reduction by 2024.

In addition, the Investment Promotion Law was modified to offer tax breaks so that at least five percent of the investment in any given project goes towards renewable energy, for the goal of cleaner production.

Uruguay has 16 medium-sized and large wind farms, like this one in the northern department of Tacuarembó. The country already has 670 MW in installed wind power capacity and a similar amount under construction, which means that 30 percent of demand for electric power will be covered by wind energy by late 2016. Credit: Ana Libisch/IPS

The state power utility, UTE, is responsible for the generation, transmission, distribution and sale of electricity to the 1.2 million clients distributed throughout Uruguay’s 176,215 square kilometres of territory.

UTE has a monopoly over energy distribution but not generation, which the private sector is also involved in, which made it difficult to include power generation in the government’s energy strategy goals.

As of late 2014, Uruguay had a total installed capacity of 3,719 MW, including generators connected to the national power grid as well as stand-alone power systems, according to the Ministry of Industry, Energy and Mining.

The supply consisted of 1,696 MW of thermal energy (from fossil fuels and biomass), 1,538 MW of hydropower, 481 MW of wind power and four MW of solar power, says the National Energy Balance 2014 report.

Breaking down the installed power capacity by source, 66 percent came from renewable sources (hydroelectricity, biomass, wind and solar), while the remaining 34 percent came from non-renewable sources (gasoil, fuel oil and natural gas).

In the economy, there was a structural shift in the energy consumption mix since 2008, which has remained unchanged for the past seven years. Industry is the biggest consumer (39 percent), followed by transportation (29 percent), residential (19 percent), commerce and services (eight percent), and lastly agriculture, fishing and mining (five percent).

From 2007 to 2014, industry overcame transportation, which was pushed to second place, driving up biomass consumption. Pulp mills played a decisive role in that, because thanks to biomass they became 90 percent self-sufficient in energy, as part of the transformation that began in 2005.

In this country, “the important change came in regard to wind power – that is where changes became necessary and challenges were addressed,” Gerardo Honty, an expert with the Latin American Centre for Social Ecology, told IPS.

Wind energy is in full expansion, “and we are nearing one gigawatt (1,000 MW) of installed capacity,” said Abal.

With respect to solar energy, “we have a 50-watt plant already in operation – that’s 100 hectares of solar panels – and a second 50-MW plant has begun to be built, with investment from Europe,” said the academic.

“The rest of the plants, around 15, are smaller, between one and five MW, and are distributed throughout the north of the country,” Abal added.

Connecting with the neighbours

Uruguay is diversifying its energy sources, but it can also “expand the grid in geographic terms; if you interconnect with Argentina and southern Brazil, the probability of having an atmospheric event that leaves you without wind power in the entire area of the pampas is very low,” said the physicist.

The national power grid has interconnections with Argentina (2,000 MW) and with Brazil (70 MW, currently being expanded to 500 MW). The latter has been delayed because the two countries’ power grids operate on different frequencies, and conversion capacity must be added to overcome the problem.

In Uruguay, “the problem isn’t the electric power industry but combustion engines that cannot run on the renewable sources mentioned,” said Honty.

Transportation, especially public transit, poses the big future challenges.

The Montevideo city government is studying the possibility of purchasing autonomous electric vehicles for the sake of energy efficiency and because they do not emit greenhouse gases while at the same time they reduce noise pollution, economist Gonzalo Márquez with the department of mobility said in a forum on energy.

But no timetable has been outlined yet, he told IPS, because there are difficulties to work out like the cost and maintenance of the vehicles, the driving range of the batteries, and the subsidy for public transport, “a hidden cost that society assumes.”

Uruguay projects that when the transformation of its energy industry is complete, greenhouse gas emissions will be 20 to 40 times lower than the global average, said Méndez, the top official in the government’s climate change response office.

This country also aims to be carbon neutral by 2030. That means “our target for that year is for the CO2 (carbon dioxide) that we absorb to be greater than what our entire economy emits,” he said.

Edited by Estrella Gutiérrez/Translated by Stephanie Wildes