"We are establishing cooperation agreements in areas considered vital for both our countries," said Brazil's President Luiz Inácio Lula da Silva after the meeting in capital Brasília with Uruguay President Tabaré Vázquez.
The two countries will create a bilateral commission to undertake geological and mining studies, and Brazil's federal energy company Petrobras (NYSE: PBR) and Uruguayan state oil company Ancap signed an MOU to study joint oil and gas exploration.
The two leaders also signed an MOU to build a 500MW transmission line to increase power exchange between the two countries. The line will complement an existing 230kV line that links the Brazilian town of Livramento to Rivera in Uruguay.
A possible Petrobras-Ancap agreement will aim to look for oil or gas in the Pelotas basin that stretches from southern Brazil to northern Uruguay, Brazil's mines and energy minister Dilma Rousseff told reporters.
"We believe that it is very possible that the Pelotas basin will show signs of oil or gas on the Brazilian side and there is no reason to believe that this would not happen on the Uruguayan side," she said. "Petrobras is willing to make partnerships with Uruguayan or any other company [that is interested]."
The Pelotas basin is one of Brazil's 20 sedimentary basins that do not produce oil. Brazil's production of 1.5 million barrels of oil a day comes from seven basins, and 80% from the Campos basin more than 2,000km north of the Brazil-Uruguay border. There are currently no exploration concessions in the Pelotas basin. Ancap does not produce oil, but has downstream commercial operations.
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