MONTEVIDEO, Uruguay, Aug. 13 (UPI) -- Uruguay has struck oil in rock formations in the north of the country near Salto, the second-largest city after the capital Montevideo, and its experts are testing to determine the find's commercial potential.
Officials gave the news of the oil's "scientific confirmation" a cautious welcome but warned it was early yet for a full assessment of the oil's commercial potential.
Unlike neighbors Argentina and Brazil, Uruguay is wholly dependent on imports for oil, natural gas and coal. Uruguay spends export earnings from agriculture, livestock and dairy produce on energy imports and has been drawing energy prospecting companies to invest in the sector.
Raul Sendic, president of the state-owned Administracion Nacional de Combustibles, Alcoholes y Portland oil company, told Uruguay's El Pais newspaper the discovery had produced "a certain degree of optimism."
ANCAP experts said the discovery could be significant because it was characterized as loose hydrocarbon, usually a key ingredient for crude oil.
"If we continue on this track we should have very good news in three to four years," Sendic said.
Further exploration might drill deeper to determine the find's full potential.
Aside from state-run ANCAP's oil exploration, drilling, prospecting and scientific studies are also under way elsewhere in Uruguay and negotiations are continuing with France's Total and Norway's Statoil for further exploratory programs, officials said.
Earlier exploration was conducted by the U.S. oil company Chesapeake Energy.
ANCAP's preliminary reports indicated subsoil in the country might contain commercially viable oil.
After two licensing rounds in 2009 and last year, the government awarded exploration areas to British Petroleum, British Gas, Tullow and Total. The next licensing round is not due until 2015.
So far, officials say, Uruguay is expected to draw at least $1.5 billion in international investment.
Geological studies conducted by ANCAP raised hopes that the organic material might contain feasible oil deposits.
"[ANCAP] doesn't want to say that Uruguay has oil fields, but that we have a very high hydrocarbon generating capacity," Sendic said following reports last year.
"We are going down a very good road, this has opened the search panorama for us," he said in comments cited by El Pais. The results led experts to conclude Uruguay might possess "an enormous generating capacity" for hydrocarbons, Uruguay Business Reports said.
Much of Uruguay's optimism is based the experience of neighboring Brazil, which has been particularly successful in locating oil and gas deposits along its long southern coast basin, uruguayproperties.com said. The basin at some point connects with Uruguay's sedimentary basin, extending north.