Saudi Arabia’s surprise January 2021 one million barrel per day production cut has sparked a sense of bullishness over the outlook for crude oil. The international Brent benchmark price has soared 25% since the start of 2021, sparking considerable bullishness over the outlook for crude oil and energy companies. Substantially higher oil prices, coupled with a renewed sense of optimism in the wake of the devastating fallout from the COVID-19 pandemic, have seen oil companies across the globe bolster investment for 2021. One jurisdiction attracting considerable attention from global oil companies in Suriname. The deeply impoverished South American country, which emerged from a brewing political crisis in July 2020 only to be confronted by the severe economic fallout from the OCIVD-19 pandemic, is readying itself to benefit from a major offshore oil boom. Like neighboring Guyana, where the former British colony’s burgeoning oil boom is delivering a tremendous economic windfall responsible for 2020 GDP expanding by 26% despite the pandemic, Suriname is anticipating a similar dividend.
The former Dutch colony of only 600,000 people has been hit particularly hard by the pandemic. The International Monetary Fund predicted 2020 GDP contracted by 13%, the second-largest decline in South America when excluding Venezuela. This, along with the Fund estimating that 2021 GDP will only grow by a paltry 1.5%, highlights the urgent need for the government of President Chan Santokhi to identify ways of restarting Suriname’s fragile economy. A swag of major petroleum discoveries was made since the start of 2020, the latest being Apache and partner Total’s Keskesi East-1 in offshore Block 58, their fourth offshore Suriname discovery. Energy supermajor Exxon along with partner Malaysian national oil company Petronas discovered hydrocarbons at the Sloanea-1 well in Block 52 which is adjacent to Block 58.
Oil Blocks in the Guyana-Suriname Basin
Drilling activity in offshore Suriname is gaining pace, particularly after Exxon’s phenomenal results in the Stabroek Block in offshore Guyana, where the integrated oil supermajor estimates it has over eight billion barrels of recoverable oil resources. The latest Baker Hughes rig count shows there is one active drill rig in Suriname. After earlier disappointing drilling results in offshore Suriname, independent oil explorer and producer Tullow Oil recently spudded the Goliathberg Voltzberg North-1 exploration well in block 47. Tullow is the operator and owner of a 50% interest in the block with 30% and 20% held by Pluspetrol and Ratio Petroleum, respectively. Citing an estimate from industry consultants Netherland, Sewell & Associates, Ratio Petroleum believes there is the potential for the discovery of resources totaling 235 million barrels of crude oil with a 34% chance of success. This is a particularly important well for Tullow because its 2017 Block 54 Araku-1 exploration well came up dry. Block 47 is northwest and adjacent to Block 54 with both being distant from Exxon’s Stabroek Block where the most significant crude oil discoveries have been made to-date in the offshore Guyana-Suriname Basin.
In mid-November 2020 Suriname’s national oil company and hydrocarbon regulator Staatsolie announced its shallow offshore bid round. Eight blocks, totaling 13,524 square kilometers, in western offshore Suriname to the south of Apache and Total’s Block 58 were made available to energy companies with bids closing 30 April 2021. While many energy companies are experiencing success in deep-water offshore oil exploration in Suriname, the history of shallow-water drilling is nowhere near as impressive. Earlier offshore shallow-water drilling campaigns yielded very few results. Paramaribo and Staatsolie’s hopes, nonetheless, have been buoyed by the volume of recent deep-water oil discoveries and the US Geological Survey’s plans to reassess its estimated petroleum resources for the Guyana-Suriname Basin considering those finds.
Incoming Chief Executive Officer of Staatsolie, Annand Jagesar, who has had a lengthy career with Staatsolie, in a January 2021 Argus article stated that Suriname will start offshore crude oil production during 2025. That will land a considerable windfall for the country’s beaten-down economy and fiscally challenged national government.
As further oil discoveries are made and offshore blocks developed the appeal of operating in Suriname for international oil companies will grow rapidly. Like neighboring Guyana, it is anticipated that Suriname will have low breakeven prices making it an attractive jurisdiction in an operating environment weighed down by weak highly volatile oil prices where the threat of peak oil demand is moving ever closer. A robust regulatory framework and oil producer-friendly regime underpinned by favorable long-term production sharing agreements and low royalty rates compared to other jurisdictions bolsters Suriname’s attractiveness for oil companies. These developments make it highly likely that Suriname will successfully tap its considerable petroleum wealth, becoming the next major offshore drilling location after neighboring Guyana.
By Matthew Smith for Oilprice.com
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