Oil Majors Are Eyeing A Suriname Offshore Boom
Majors are eying Suriname as the next big oil player. With recent success in neighbouring Guyana, Suriname offers hope for low-cost oil exploration and production going into 2021. Exxon Mobil, Royal Dutch Shell, Total, Apache are all showing interest in the South American state, hoping Suriname will provide oil for as little as $30 to $40 a barrel thanks to lower production costs. This is well below the average US production cost of almost $50 per barrel.
After years of political unrest, Suriname is eager to make a name for itself in the oil world and encourage economic stability and growth. The hard-hit economy has been further hampered by the Covid-19 pandemic, with the new government looking at the country’s oil potential to drag them out of economic disaster.
Attracting oil investment from foreign companies only became possible after the successful discovery of oil in deep wells in 2015, following around 60 years of failure in shallow waters. At present, state-owned Suriname’s national oil company Staatsolie controls most of the industry.
To encourage investment, Suriname is offering companies 30-year production-sharing agreements, around 10 years longer than those of Latin America’s other oil-rich countries. Following a difficult 2020, emerging oil states such as Suriname and Guyana are expected to dominate licensing rounds this year with such attractive terms.
Oil experts believe there to be at least three to four billion barrels of reserves in Suriname’s waters, providing foreign companies with a bet worth taking for the future of the region’s oil.
Earlier this month, Total and Apache Corporation made an important oil and gas discovery off the coast of Suriname at the Keskesi East-1 well, in Block 58. This brings the total number of oil discoveries in the country to four in 2020, or 1.4 billion barrels of oil equivalent. Total’s Senior Vice President Exploration Kevin McLachlan stated “We are… excited, as new operator of the block, to start the appraisal operations designed to characterize the 2020 discoveries, while in parallel start a second exploration campaign on this prolific block in 2021.”.
In addition, ExxonMobil announced oil and gas finds in Suriname in December. Mike Cousins, Exxon’s Senior Vice President of exploration and new ventures, explained “Our first discovery in Suriname extends ExxonMobil’s leading position in South America, building on our successful investments in Guyana. We will continue to leverage our deepwater expertise and advanced technology to explore frontier environments with the highest value resource potential.”
One recent partnership that’s caught attention in the region is the contract between Maersk Drilling and Total E&P, valued at $100 million. The partnership’s deepwater oil rigs Maersk Valiant and Maersk Develop in Block 58 are expected to start operations this month.
Suriname hopes to follow in the footsteps of neighbouring Guyana, which has attracted significant foreign investment in its oil industry in recent years. Exxon in particular has been investing heavily in the region, commencing production in Guyana’s Liza oilfield in 2019; an area capable of pumping 120,000 bpd. Exxon is now looking to develop the Stabroek Block, having signed a sharing agreement with the government, expected to produce 750,000 bpd by 2026.
Oil production in Guyana could extend beyond the next 30 years, presenting an attractive opportunity for longer-term exploration and low-cost production. In 2020, Guyana had an anticipated economic growth of around 50 percent, mainly owing to its burgeoning oil industry. According to the IMF, the country can expect an average annual real GDP growth of around 13 percent over the next four years.
As companies are less willing to become entangled with neighbouring Venezuela, due to its complex political situation and current US sanctions, with the country’s oil exports falling to its lowest levels in 77 years in 2020, Guyana and Suriname offer a bright alternative.
While it is early days for drilling in Suriname, success in Guyana and a clear interest from international oil majors could put the small South American state on the map.
OilPrice.com, Editor: Felicity Bradstock, January 27, 2021