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Suriname’s Oil Boom Hits A $10 Billion Snag

  • Suriname’s offshore oil basins have shown tremendous promise.
  • Conflicting seismic data has delayed Apache and TotalEnergies FID on a key block in the region.
  • There is some speculation the FID will be made by mid-2023.

A series of high-quality oil discoveries in Block 58 offshore Suriname combined with investment bank Morgan Stanley estimating that the block contains 6.5 billion barrels of oil sparked optimism that Suriname will replicate Guyana’s immense oil boom. This is bolstered by evidence that the U.S. Geological Survey grossly underestimated the Guyana-Suriname Basin’s oil resources. Disappointingly, after Block 58’s partners Apache and TotalEnergies made five commercial discoveries since 2020 they have delayed making the final investment decision (FID) which was expected by the end of 2022. That FID is crucial for moving Suriname’s nascent oil boom from the exploration phase to production. This development means the former Dutch colony will not become a major oil producer and exporter as soon as anticipated, thereby delaying the tremendous economic windfall anticipated by the national government in Paramaribo.

The first oil discovery in offshore Suriname was announced by Apache in January 2020, five years after ExxonMobil struck oil in neighboring Guyana in what is now the very prolific offshore Stabroek Block. That first find was made with the Maka Central-1 well in Block 58, which struck 240 feet (73 meters) of oil pay and 164 feet (50 meters) of light oil and gas condensate pay. This, according to Apache, at the time, confirmed the geological modeling of the block. The partners then went on to make four further commercial oil discoveries and two non-viable finds in Block 58. The most important is the Sapakara discovery which Apache estimates to contain 400 million barrels or more of recoverable oil resources. Appraisal activities are ongoing at the Sapakara South-2 well, where flow-test operations were being undertaken during November 2022. Apache and TotalEnergies have yet to provide an update on those activities.

Offshore Suriname Block 58 is believed to possess considerable oil potential because it is situated adjacent to offshore Guyana’s prolific Stabroek Block and is predicted to contain the same petroleum fairway.

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Source: Apache Investor Update September 2022.

Block 58 is believed to hold at least five billion barrels of recoverable oil resources, perhaps as high as 6.5 billion barrels, according to modeling conducted by U.S. investment bank Morgan Stanley. Apache’s August 2022 oil discovery with the Baja-1 well in Block 53 offshore Suriname, which gave the former Dutch colony’s oil prospects a solid boost, also confirmed the considerable hydrocarbon potential thought to be contained in Block 58. Suriname’s national oil company Staatsolie anticipates that the impoverished former Dutch colony’s territorial waters could contain as much as 30 billion barrels of recoverable oil resources. This will be a tremendous economic boon for a deeply impoverished South American nation where gross domestic product contracted 3.5% during 2021 when other regional countries experienced strong post-pandemic growth.

Apache and TotalEnergies’ discoveries are comprised of medium to light sweet crude oil and condensates with API gravities of 34 degrees to 60 degrees and low sulfur content. Those characteristics are like the crude oil found by ExxonMobil in the neighboring Stabroek Block offshore Guyana, with Liza grade petroleum possessing an API gravity of 32 degrees and 0.58% sulfur content. This is particularly important because of the growing push to decarbonize the global economy and ever stricter emission regulations for fossil fuels. Lighter, sweeter petroleum is easier, cheaper and less carbon-intensive to extract than the heavier sourer grades lifted in South America such as Venezuela’s Merey, Colombia’s Castilla and Ecuador’s Napo. They are also less complex and cheaper to refine into high-quality low, emission fuels.

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Those attributes enhance offshore Suriname’s attractiveness as an area for foreign energy companies seeking to boost oil reserves and production, especially with the world economy being progressively decarbonized. It is for these reasons industry analysts and Suriname’s government in Paramaribo were expecting a massive oil boom, mirroring that in neighboring Guyana, to takeoff with production forecast to reach an impressive 650,000 barrels per day by 2030. There are signs, however, this will not occur with the first oil still some way off because it will take considerable time and investment to ramp up operations to the point where production reaches anywhere near that volume.

A major headwind is Apache and TotalEnergies’ decision to delay the FID for Block 58. Paramaribo had anticipated the FID would occur before the end of 2022 but owing to a range of anomalies detected by TotalEnergies, which became the operator of Block 58 on 1 January 2021, it has been deferred. TotalEnergies’ CEO Patrick Pouyanne blamed the delay on contradictory seismic data and results from delineation wells. There has also been a sharp increase in the volume of dry wells being drilled in Block 58, contrary to the expectations set by earlier discoveries and geological data, magnifying concerns about the commercial viability of operations.

In late November 2022, it was announced that the Awari exploration well was found to be non-commercial, capped and abandoned. That disappointing result came on the back of the August 2022 announcement that the Dikkop well in Block 58 encountered water-bearing sandstone, which saw it capped and abandoned. Apache also announced during November 2021 a non-commercial black oil discovery in Block 58 at the Bonboni-1 well. The single pay zone of 52 feet, or 16 meters, containing black oil with an API gravity of 25 degrees was deemed insufficient to support the commercial development of the discovery. Those poor drilling results, which are in stark contrast to earlier discoveries and conflicting geological data, are a key reason for TotalEnergies’ decision to delay the FID.

At this time, there is no indication as to when the FID will be made other than speculation that it will occur by mid-2023. The considerable concern regarding the outlook for Block 58 is justified when it is considered that it will take up to $10 billion to develop what is shaping up to be a problematic block that may not be the next Stabroek. This is weighing on Paramaribo’s plans to develop Suriname’s offshore oil potential and give the economy a solid boost through a massive oil boom. Neighboring Guyana saw its GDP expand by a whopping 58% in 2022. These latest developments could also impact the success of Suriname’s long awaited Demara Bid Round, which was opened in November 2022, where six offshore blocks are on offer and bids close on 28 April 2023.

By Matthew Smith for Oilprice.com

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