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Matthew Smith

Matthew Smith

Matthew Smith is Oilprice.com's Latin-America correspondent. Matthew is a veteran investor and investment management professional. He obtained a Master of Law degree and is currently located…

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Can Suriname Replicate Guyana’s Oil Boom?

  • The Guyana-Suriname Basin is quickly emerging as one of the most prolific offshore oil regions in the world.
  • Guyana has had tremendous success in its ventures with Big Oil in the region.
  • Suriname is looking to follow in Guyana’s footsteps though it has suffered a few setbacks along the way.

The offshore Guyana-Suriname Basin emerged in 2019 as one of the world’s most exciting drilling frontiers. While the U.S. Geological Survey estimated that the basin contained mean undiscovered oil resources of 15 billion barrels, disappointing exploration results saw international energy companies shun the geological formation. It wasn’t until 2015 when a consortium led by ExxonMobil made the world-class Liza oil discovery in the 6.6-million-acre Stabroek Block offshore Guyana. Since then, Exxon has made a swathe of high-quality oil discoveries, 33 since 2015, in the block, which is estimated to contain recoverable oil resources of at least 11 billion barrels. Those discoveries have been a boon for Guyana’s economy, which expanded by a whopping 43.5% in 2020, when the COVID-19 pandemic caused most economies to contract, and then by 19.9% in 2021. The former British colony’s oil-driven economic miracle is gaining momentum, with the IMF forecasting GDP growth of 57.8% for 2022. Neighboring Suriname, which saw its economy hit hard by the pandemic with GDP plunging 15.9% during 2020, is hungrily eyeing the oil wealth held in its territorial waters. Related: Saudi Arabia Expresses Its “Total Rejection” Of U.S. Statements About OPEC+

The Guyana-Suriname Basin is set to become one of the world’s most prolific offshore oil-producing regions, especially after it is considered that the USGS grossly underestimated the volume of crude oil contained in the basin. The combined total of the 11 billion barrels found in the Stabroek Block and the potential 6.5 billion barrels believed to be in Block 58 offshore Suriname is far greater than the USGS’s May 2001 estimate of 15 billion barrels of mean undiscovered oil resources held by the basin. The latest news concerning the ongoing exploration and appraisal of offshore Suriname point to it holding tremendous oil wealth like neighboring Guyana. A series of quality oil discoveries have already occurred in Block 58 offshore Suriname. U.S. international driller Apache, along with 50% partner French oil supermajor TotalEnergies, announced the first discovery in Block 58 in January 2020. The partners then announced a further four exploration discoveries with the latest occurring during February 2022.

Source: Apache Investor Update September 2022.

A recent disappointing development was the August 2022 announcement that the Dikkop exploration well drilled in Block 58 did not find the presence of hydrocarbons and was capped. Apache and TotalEnergies are currently working on an appraisal well in the Sapakara South oilfield and planning to drill an exploration well at the Awari prospect in the northern part of Block 58. In total, seven exploration wells were drilled to date in Block 58, with five identifying significant hydrocarbon reservoirs requiring further appraisal, while two were found to be dry.

 In late 2020 U.S. investment bank Morgan Stanley stated that according to its modeling Block 58 contains at least 6.5 billion barrels of oil resources, with that number potentially higher if further discoveries are made. The recoverable oil resources held by Block 58, and hence Morgan Stanley’s estimate, will be quantified by the appraisal work being conducted in Block 58 by Apache and TotalEnergies. Both drillers have yet to make a final investment decision as to whether they will start to commercially exploit the block. It was widely anticipated that Apache and TotalEnergies would make an FID during 2022, but it has been delayed until mid-2023. According to the French supermajor’s chief executive Patrick Pouyanne, there are concerns over a conflict between what seismic data is showing in Block 58 compared to results from delineation wells.

While Apache lucked out with the Block 58 Dikkop exploration well, it was announced in August 2022 by the driller and its partners that they had made the first oil discovery in Block 53 offshore Suriname. Apache is the operator of Block 53, holding a 45% working interest, with the remaining 30% and 25% held by Malaysian national oil company Petronas and Spain’s CEPSA, respectively. The Baja-1 well was drilled to a depth of 17,356 feet, or 5,290 meters, where 112 feet equal or 34 meters of net oil pay was identified. Apache is negotiating with Suriname’s national oil company and industry regulator Staatsolie to obtain a one-year extension for the exploration period which under the production sharing contract can be extended for up to four years. After accounting for Petronas and Exxon’s December 2020 discovery with the Sloanea-1 well in Block 52 there have been seven potentially viable oil discoveries in offshore Suriname since the start of 2020.

The latest developments bode well for Suriname to experience an oil boom on a similar scale to that which is occurring in neighboring Guyana. Paramaribo is focused on attracting foreign capital to sustain the required drilling and development activity. Staatsolie recently revealed a proposal to invest $1.5 billion by 2026, with the lion’s share destined for the South American country’s offshore drilling program. The state-controlled energy company also disclosed plans to promote Suriname’s available offshore acreage, to attract foreign investment, while developing its capabilities to eventually become an operator. Staatsolie also intends to auction offshore Suriname deep-water blocks before the end of 2022 and hold another bid round for shallow-water blocks during 2023. Those plans come on the back of Staatsolie’s 2021 shallow water auction, which saw three blocks acquired by Chevron, TotalEnergies and Qatar Petroleum. Anglo-Dutch energy supermajor Shell inked a December 2021 deal that saw it acquire a 20% interest from Chevron in shallow water Block 5

While it was widely predicted that Suriname was on track to produce its first offshore oil during 2025, development delays with Block 58, mean that is more likely to occur during 2027. The volume of oil discoveries made in the Guyana-Suriname Basin, coupled with the generous PSAs established by Paramaribo, are key incentives for luring much-needed foreign capital to develop offshore Suriname’s considerable oil wealth. The efforts of Paramaribo and national oil company Staatsolie to attract additional investment for the development of Suriname’s considerable offshore oil wealth will bolster the pace of drilling. For those reasons, the first oil could occur sooner than 2027, and Suriname should undergo an epic boom like its neighbor Guyana. When production commences in offshore Suriname, it will be a boon for the deeply impoverished South American country’s ailing economy, which is forecast by the IMF to grow by a paltry 1.3% for 2022 compared to Guyana’s 57.8% and an average of 3.6% for South America.

By Matthew Smith for Oilprice.com


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