Suriname is one of Latin America’s poorest countries. Up until July 2020, the former Dutch colony was mired in a political crisis that emerged from the hotly contested May parliamentary elections. It saw incumbent, former military strongman and convicted murderer, Desiree Bouterse replaced by former police chief and justice minister Chandrikapersad Santokhi as the country’s president. This, it is hoped, clears the way for Suriname to access what is believed to be its considerable petroleum resources, which if correctly exploited could transform the deeply impoverished South American country.
Suriname is one of the poorest countries in South America with a gross domestic product per capita of $6,855 for 2019, which is lower than Argentina, Brazil, and Peru. It is wealthier on this measure than neighboring Guyana which is undergoing what could become South America’s largest oil boom and was also mired in a political crisis until last month. The former Dutch colony shares with its neighbor the offshore Guyana-Suriname Basin, which the US Geological Survey (USGS) estimates to hold almost 14 billion barrels of oil and 32 trillion cubic feet of natural gas. Toward the end of 2019, the agency stated that it planned to reappraise the basin during 2020, although that may be delayed because of the COVID-19 pandemic.
The part of the basin located in Suriname’s territorial waters is under-explored and energy companies have not experienced the same degree of success as Exxon, Hess, and Tullow in Guyana. It is, however, believed that the USGS has underestimated the basin’s hydrocarbon potential, and recoverable oil and natural gas resources could substantially exceed its original estimates.
The Guyana-Suriname Basin’s considerable hydrocarbon potential is demonstrated by ExxonMobil’s multiple significant oil discoveries in Guyana’s offshore Stabroek Block. Those saw the energy major upgrade its recoverable resources in offshore Guyana to more than eight million barrels at the start of 2020. This is further underscored by Tullow’s success in offshore Guyana which saw CEO Paul McDade state in a September 2019 conference call; “The whole area appears to be characterized by excellent quality reservoirs.”
Indications are that Suriname’s own oil boom is finally gaining momentum. Apache Corporation announced a major oil discovery at its Block 58 in offshore Suriname at the end of July 2020. That came on the back of two earlier discoveries in the same Block in January and April 2020 respectively. The January Maka Central-1 discovery was the first offshore oil find in Suriname. Apache has prioritized Suriname as it seeks to capitalize on those oil discoveries and replicate Exxon’s success at the offshore Liza oil field in the Stabroek block in neighboring Guyana. Apache, along with Block 58 partner oil major Total, has identified 50 prospects in the 1.4 million offshore block and plans to conduct further exploratory drilling at the Keskesi target.
Exxon is seeking to replicate the substantial success it has enjoyed in offshore Guyana in Suriname. In 2017 the integrated oil major established a production sharing agreement with Suriname’s national oil company Staatsolie for offshore Block 59 with partners Hess and Statoil. That deepwater asset shares a maritime boundary with Guyana, meaning that Exxon can leverage off the infrastructure it has established for the world-class Liza oil field in Guyana’s offshore Stabroek Block. Exxon acquired a 50% interest in Block 52 offshore Suriname toward the end of May this year from Malaysian integrated energy major Petronas, which owns the remaining 50% and is the operator.
It is easy to understand the attractiveness of offshore Suriname in the current difficult operating environment weighed down by sharply weaker oil prices. Hess claims that its offshore production in Guyana has a breakeven price of $35 per barrel making those assets potentially profitable even with Brent at $42 a barrel. The ability to leverage off the experience gained in Guyana and infrastructure put in place means the breakeven price for offshore production in Suriname could be even lower, especially as drilling techniques improve, and operational efficiencies are realized. This highlights why foreign oil companies led by Apache, Total Exxon, Hess, Tullow, and Petronas are investing heavily in offshore Suriname oil assets. For as long as oil prices are caught in a protracted slump, jurisdictions like Suriname and Guyana which have low breakeven prices will remain the focus of energy majors.
Suriname’s national oil company Staatsolie regulates the former Dutch colony’s oil industry, including awarding concessions to foreign oil companies and establishing production agreements. Staatsolie has announced that it intends to tap bond markets in 2020 intending to raise up to $2 billion to fund exploration and development activities. The national oil company has also flagged listing stock on a major global exchange to raise further capital, much like the national oil companies of Brazil (Petrobras) and Colombia (Ecopetrol) have done. That indicates the national oil company is getting ready to fund further activities aimed at boosting investment in Suriname’s burgeoning oil industry.
These are important developments for deeply impoverished Suriname. If the current tempo of operations can be maintained it is likely that the former Dutch colony will, like neighboring Guyana, be on track to benefit from considerable oil wealth. This will be transformative for a country that is facing an economic disaster because of the impact of the COVID-19 pandemic. The IMF expects Suriname’s GDP to contract by almost 5% in 2020 compared to Guyana’s soaring by roughly 53% because of its oil boom. Those numbers underscore the tremendous benefits available to the impoverished former Dutch colony if it can exploit the substantial hydrocarbon wealth which exists within its territory. The change in government bodes well for a more stable, business-friendly environment which will promote economic growth while ratcheting down political and regulatory risk for foreign investors.