Major oil companies betting big on Suriname

Durrant Pate/Contributor

Since early 2020 there have been a number of oil discoveries offshore Suriname with the Caribbean South American country poised to become one of the world’s hottest offshore oil frontiers.

In fact, the Guyana-Suriname Basin is one of the most exciting oil frontiers on the planet with major oil companies now scrambling to get in on the basin’s massive potential. Oilprice.com reports that the appeal of offshore Suriname is amplified by the fact that the oil discovered to date has been light to medium with low sulfur content.

This means it is cheaper and easier to refine into high-quality fuels, and there is a low carbon cost associated with its extraction compared to the heavier sourer oil grades produced in Venezuela, Colombia and Ecuador. Projects in Suriname are said to have an estimated breakeven price of US$40 per barrel Brent, which is expected to fall further, as development ramps up and vital infrastructure is put in place.

For these reasons, offshore Suriname is an appealing investment jurisdiction for international energy companies, particularly when it is considered that many Latin American countries have far higher breakeven prices.

Potential oil capacity in Suriname

Surinam’s national oil company and industry regulator, Staatsolie is reporting that data obtained points to offshore Suriname containing up to 30 billion barrels of recoverable oil equivalent resources. Staatsolie, which was established in December 1980 to execute Suriname’s oil policy, which includes exploration, drilling and processing oil, recently launched the 2022-2023 Demerara Bid Round with bids closing on May 31, 2023.

This is comprised of six blocks 63 to 68 in offshore Suriname located to the northeast of the existing deep-water blocks where discoveries have been made. The national government in the capital, Paramaribo is feverishly seeking to attract further investment from the global energy companies needed to explore and develop offshore Suriname.

This includes establishing some of the energy industry’s most generous production sharing contracts or PSCs. The 30-year PSCs, which are up to 10 years longer than equivalent contracts offered by other Latin American countries, provide oil companies with considerable time to successfully develop and exploit any hydrocarbon discoveries made.

Paramaribo has also established a low royalty rate of 6.25 per cent in order to attract urgently needed foreign energy investment. That rate, while higher than the two per cent put in place by Guyana’s government for the Exxon-led consortium exploiting the Stabroek Block, is among the lowest in Latin America.

Oil royalties in Argentina amount to 12 per cent of wellhead production. In Brazil, a 15 per cent royalty is levied on the value of the oil produced, while they from eight per cent to 25 per cent in Colombia and 12.5 per cent to 18.5 per cent in Ecuador.

Imperatives for Suriname

Existing seismic and other data points to the region holding considerable hydrocarbon potential. This will build off the shallow water bid round completed in late 2021, where three blocks were awarded to Qatar Petroleum, TotalEnergies and Chevron.

If Paramaribo can appropriately exploit that considerable hydrocarbon potential, it will deliver a significant economic windfall for the deeply impoverished South American country of roughly 600,000 people. For that to occur, many obstacles need to be overcome.

The most immediate being Apache and TotalEnergies decision to delay making a financial investment decision for exploiting Block 58 because of anomalies between seismic and drilling data. Since early 2020 there have been a number of oil discoveries in offshore Suriname.

By early 2022, Apache and TotalEnergies had made five commercial oil discoveries in Block 58. The partners are drilling the Awari prospect in Block 58, which is roughly 17 miles north of the first discovery in the block at the Maka Central-1 well.