Uruguay's Union Oil and Gas Group has been awarded the right to conduct exploratory work in the western province of Paysandu, CEO Guzman Fernandez told EFE.
"After an administrative process, the company received the decree signed by the nation's president, Tabare Vazquez," Fernandez said Friday, adding that UOGG will become the first domestic company to carry out oil and gas prospecting in Uruguay.
The initial contract covers one year of onshore oil exploration, but if crude is found it could be extended by Uruguayan state oil company Ancap, which has a monopoly on oil refining and fuel distribution in the South American country.
The area to be explored encompasses an area of 1,750 sq. kilometers (675 sq. miles), the company said.
Studies by UOGG's geologists indicate a high probability that oil will be discovered and that is why the company has decided to invest in Uruguay, Fernandez said.
The company, which is partly foreign owned, will invest between $500,000 and $1 million in the initial stage of studies in that area.
UOGG conducts activities in Bolivia, Paraguay, Peru and Uruguay and is planning to launch operations in Argentina and Colombia.
In January, Uruguay's government said that by March it expected work to begin on an exploratory well in the nation's continental shelf, 400 kilometers (240 miles) off the coast of Montevideo. That well will cost around $200 million to drill and be the world's deepest.
Irving, Texas-based ExxonMobil, Norway's Statoil and France's Total are among the companies that will participate in that offshore work. EFE