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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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Latin America’s Next Oil Hotspot

Little known South American country Suriname, a Dutch colony which gained independence on 15 December 1954, is becoming one of the world’s hottest offshore drilling locations. The country shares the Guyana-Suriname Basin with former British colony Guyana and saw a series of high-quality oil discoveries made this year. Globally diversified oil producer Apache announced three major oil discoveries. All were made in offshore Suriname Block 58, in which Apache has a 50% interest with French supermajor Total owning the other half. The finds are comprised of the January Maka Central-1 well, April Sapakara West-1 well and July Kwaskwasi-1 well. Apache has described the crude oil discovered as being light with API gravity of 34 degrees to 45 degrees. Importantly, the U.S. upstream energy company characterized those discoveries as a “substantial resource,” pointing to the considerable oil potential held by the oil acreage. Block 58 is adjacent to the Stabroek Block in offshore Guyana, where ExxonMobil has made a series of world-class oil discoveries which are estimated to have more than 8 billion barrels of recoverable oil resources. Block 58 is located on the same hydrocarbon trend as Stabroek, indicating that further discoveries are waiting to be made. This is broadly supported by the U.S. Geological Survey which estimates mean undiscovered oil resources of over 15 billion barrels in the Guyana-Suriname Basin.  Those discoveries saw Apache choose to ramp-up activity in offshore Suriname, commencing drilling of the KesKesi well in Block 58 during September 2020 and planning a fifth, Bonboni, for the northern part of the block. In Apache’s third-quarter 2020 results its chief executive officer and president John J. Christmann IV stated, “Apache has strategically chosen to direct a significant portion of our upstream capital investment to our large-scale opportunity in Suriname.” That underscores the considerable potential believed to be held by Apache’s oil assets in offshore Suriname. Apache also announced earlier this month that it has filed appraisal plans for the Maka and Sapakara oil finds, while the Kwaskwasi plan should be submitted by year-end. The U.S. upstream oil company also has a 45% stake in neighboring Block 53 where 30% is owned by Malaysian state-controlled energy company Petronas and the remaining 25% interest by Spanish oil company Cepsa.

Apache and Total are not the only international energy companies conducting exploration drilling in offshore Suriname. In October 2020, Petronas spudded its first well, Sloanea-1, in Block 52 where it has a 50% interest. The remaining 50% was acquired by Exxon in a May 2020 farmout deal with the Malaysian energy company. This boosts the oil supermajor’s presence in offshore Suriname which commenced in 2017 when it acquired Block 59. The global oil supermajor’s interest in the impoverished former Dutch colony, after experiencing significant offshore success in Guyana, speaks volumes about Suriname’s petroleum potential. Petronas also owns 100% of Block 48.

UK-based oil explorer and producer Tullow Oil acquired licenses for offshore blocks 47, 54 and 62 in Suriname. During 2017, Tullow announced the completion of the Araku-1 exploration well on Block 54 in which the company has 30% alongside the 50% owned by Norway’s Equinor and the remaining 20% held by Noble Energy. No oil was discovered, but Tullow was confident that the presence of condensate indicated that the block held promise. Tullow announced it is planning to drill the Goliathberg-Voltzberg North well in offshore Suriname Block 47 during the fourth quarter 2020. The UK based driller remains hopeful that its exploration activities will emulate the success of Apache and Total in Block 58.

Related: Norway Opens New Arctic Oil Blocks For Exploration

These developments indicate that exploration activity in Suriname is heating up and it will be given a solid boost by higher oil prices with Brent having rallied to around $44 per barrel. That is significantly higher than the $35 per barrel breakeven costs estimated for the Stabroek Block which borders offshore Suriname blocks 58 and 42. There is every indication that as drilling technology, energy infrastructure and knowledge of the Guyana -Suriname Basin improves, that breakeven prices for offshore Suriname will be similar. That, along with it expected to produce light lower sulfur content crude oil grades than onshore operations in South America, will make Suriname an attractive investment destination for international oil majors. Suriname’s state-controlled oil company and petroleum regulator Staatsolie on 16 November 2020 announced shallow offshore 2020/2021 bid round. There are eight shallow water blocks on offer, comprising 13,524 square kilometers south of Block 58. The data room opens on 30 November 2020 and bids are expected to be received by 30 April next year. This will open-up under-explored and unexploited acreage which is believed to contain considerable petroleum potential.

These are important developments for deeply impoverished Suriname, which has been hit hard by the coronavirus pandemic. A 2019 gross domestic product of just under $4 billion makes it one of the poorest countries in South America. The IMF forecast that because of the considerable fallout from the COVID-19 pandemic Suriname’s economy will shrink by 13% during 2020, one of the worst declines in the region. This will trigger even greater poverty and place considerable pressure on Paramaribo’s finances. Increased oil exploration activity in offshore Suriname, coupled with the potential for a major oil boom mirroring that underway in Guyana could not have arrived at a better time. Those developments will add to the considerable momentum driving South America’s existing offshore oil boom making it a leading location globally for offshore oil. If Suriname’s government can effectively exploit the country’s potentially vast offshore petroleum wealth its economy will grow rapidly, boosting wealth and reducing poverty in the former Dutch colony.  

By Matthew Smith for Oilprice.com

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