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Viktor Katona

Viktor Katona

Viktor Katona is an Group Physical Trader at MOL Group and Expert at the Russian International Affairs Council, currently based in Budapest. Disclaimer: views set…

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Is This South America’s Next Oil Drilling Hotspot?


The oil industry in South America is in sever need of positive stimuli – the Argentinian shale wonder has just survived a near-collapse of its government only to be stalled by the coronavirus, Venezuela is falling ever lower, whilst Colombia is struggling to kickstart its oft-lauded shale bounty. Suriname, a Dutch-speaking nation of some 600 000 people, might become just that, South America’s next drilling hotspot. The previous Guyana has had a phenomenal string of successes with its exploratory wells, up until 2020 18 out of the total 20 wells spudded wielded commercially exploitable reserves. Could neighboring Suriname follow in Guyana’s footsteps with an equally awe-inspiring drilling tally? So far it seems that there is every reason to believe it can.

There are two major differences between Suriname and Guyana. The first, and perhaps less important, is that Suriname has been producing some crude from onshore assets since the 1930s, thus oil would not come as an entire novelty for the South American nation’s authorities. The second is that Suriname has had to struggle its way through initial disillusionment, the path to success was by no means immediate and linear. Just as Guyana’s Liza discovery was heating up interest towards the Guyana-Suriname basin, Kosmos Energy drilled the Anapai and Pontoenoe wildcats in 2017 – the first encountered high quality reservoirs but no hydrocarbons, whilst the second found hydrocarbons but was water-bearing. Apache, too, had had unsuccessful wildcats in 2015 and 2017 at Block 53 before starting off a string of high-profile discoveries.

Suriname’s hopes of it replicating Guyana’s success were further boosted by the Apache’s latest discovery. The Kwaskwasi-1 well was spudded in a water depth of some 1000 metres to a total depth of 6645 metres, using the Noble Sam Croft drillship. This discovery might be one of the highlights of the entire Guyana-Suriname Basin, having found 278 meters of net oil and an oil/gas condensate in two intervals – a 63 meters net oil pay and 86 meters of net volatile oil/gas condensate pay in the shallower Campanian interval, and a 129 meters net oil pay in the deeper Santonian interval. Kwaskwasi became the third Apache-Total discovery this year, joining the ranks of Maka and Sapakara (both of which had exceeded expectations). Related: The Start Of A New Oil Market Supercycle

Source: Apache.

The first one to take place in Suriname’s offshore, the Maka Central discovery buoyed Latin America watchers as the exploratory well unearthed a 73 metres net oil pay and not gas-condensate (as the adjacent Haimara field in offshore Guyana), with crude density oscillating within the 35-40° API. The discovery of Maka was announced in January 2020, today Suriname’s stature seems even brighter. All of Suriname’s Block 58 discoveries were carried out by the same drillship, Noble Sam Croft. All three discoveries wield net pays exceeding 60 meters, with crude qualities roughly conforming to the 35-45° API interval (i.e. lighter than Guyana’s Liza). In the light of such drilling results, perhaps Apache’s claims that it had identified at least 7 play types solely within Block 58, with more than 50 potential drilling prospects, no longer seems that naïve or idealistic.

The drilling success will also aid the administration of Chandrikapersad Santokhi, Suriname’s new president after Desi Bouterse accepted his defeat and decided to steer clear of further confrontation.
Given the shaky character of the transit – the troubled South American country still lacks a tradition of seamless power transfers – as well as recent indication that Guyana might move to revisit its upstream terms, Santokhi’s government is not expected to change the currently existing upstream terms so as to consolidate its international stature. Moreover, having chosen Ronnie Brunswijk as his vice president (formerly the bodyguard of Bouterse, turned into the “Robin Hood of Suriname” as Bouterse burned down his native village in the 1986 Moiwana massacre), there will be enough internal reckoning not to jeopardize foreign investment.

The probability that Suriname will witness another substantial discovery following Kwaskwasi is quite high. Apache has signaled its intent to spud the Keskesi East-1 well (the fourth prospect within Block 58) right after the Noble Sam Croft drillship finished operations on Kwaskwasi. Keskesi is located some 9 miles from Sapakara, with Apache targeting the oil-prone upper Cretaceous deposits. Interestingly, Apache remains the operator of Block 58 it had farmed down 50% of interest to Total in December 2019 – the French major paid an upright $100 million bonus and committed to pay a quarterly royalty on the first 1.5 billion barrels of gross production (the royalty moves between 0.25 and 0.5 per barrel subject to the quarterly Brent average). Once Keskesi is drilled, Total would also take over the operatorship of Block 58.

Following Apache’s drilling streak, the next move in Suriname’s offshore will be the spudding of the Petronas-operated Sloanea-1 well in Block 52, expected to take place in Q4 2020 using the Maersk Developer semi-submersible rig. Up until this May Petronas was the sole stakeholder in the given acreage only to farm down 50% of participating interest to ExxonMobil, i.e. if drilling within the given block also results in discoveries, the US major would expand its working acreage to both Guyana and Suriname. Tullow’s drilling the Goliathberg-Voltzberg North (also abbreviated as GVN) on Block 47 in Q1 2021, with first results expected to emerge after 2-3 months of drilling. For Tullow and its Block 47 partners (the Argentinian Pluspetrol that owns 30% and the Israeli Ratio Oil owning 20%) this will be a much symbolic move as its previous exploratory well (Araku-1) failed to find any commercial deposits.

By Viktor Katona for Oilprice.com


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