NOORDWIJK, Netherlands (AP) -- A small, unmanned satellite that relies on solar power to propel it into orbit around the moon was unveiled Thursday by the European Space Agency, which plans to use the spacecraft in Europe's first attempt at a lunar exploration.

The craft, known as the SMART-1, is to launch in July for a two-year mission orbiting the moon to look for water, believed to be hidden deep in craters on the lunar surface. It will also gather evidence to test the theory that the moon was created when a giant asteroid struck the Earth during the early days of our solar system.

At the unveiling of the SMART-1, whose name stands for Small Missions for Advanced Research and Technology, ESA's scientific director David Southwood said that the smaller price tag was a byproduct of cleverly accomplishing the mission's goals.

"Cheaper isn't necessarily better," he said. "We're able to be smarter because we're smaller" than NASA.

The average annual cost of a NASA space shuttle mission is about US$600 million.

An important part of the SMART-1 project is testing the solar-powered engines, which provide only a minuscule thrust, but can be run over a much longer period than the traditional chemical rocket thrusters used by earlier spacecraft.

Scientists at the ESA -- funded by 15 European countries and based in Paris -- believe the engines will be an indispensable part of making longer space voyages to Mercury and Mars. Over time, small thrusts have a huge cumulative effect.

NASA used a similar solar-powered system on its Deep Space 1 mission in 1998.

It will take SMART-1 between 12 and 15 months after its launch from Kourou, French Guiana, to maneuver into orbit with the moon, and several more weeks to move into a tight lunar orbit.

Once there, the satellite will use infrared light to search for water in the form of ice hidden in the craters of the moon's south pole, where earlier NASA missions found high levels of hydrogen. The mission will also use X-rays to map the chemical composition of the entire lunar surface.

Project scientist Bernard Foing said if heavy elements such as iron are found to be relatively rare compared to lighter elements such as magnesium, it would strongly support the theory that the moon was formed from debris caused by a massive collision between the Earth and an asteroid or other heavenly body around 4.5 billion years ago.

"It's believed that about the moon will be 80 percent composed of Earth material," Foing said.

After its mission is complete, the satellite will likely be crashed into the moon.