Latin America’s Next Oil Hotspot
The little-known South American country of Suriname, a Dutch colony that gained independence on December 15, 1954, is becoming one of the hottest offshore drilling locations in the world. The country shares the Guyana-Suriname Basin with the former British colony of Guyana and has made a number of high-quality oil discoveries this year. Globally diversified oil producer Apache announced three major oil discoveries. All were made in the offshore Suriname block 58, which Apache has a 50% stake in, with the French super major Total owning the other half. The findings consist of the January Maka Central-1 well, the April Sapakara West-1 well and the Juli Kwaskwasi-1 well. Apache has described the discovered crude as being light with an API gravity of 34 to 45 degrees. Importantly, the upstream US energy company labeled these discoveries a "significant resource" and pointed out the significant oil potential of the oil-growing area. Block 58 adjoins the Stabroek Block off the coast of Guyana, where ExxonMobil has made a number of world-class oil discoveries valued at more than 8 billion barrels of recoverable oil resources. Block 58 is on the same hydrocarbon trend as Stabroek, indicating that more discoveries are waiting to be made. This is largely backed by the U.S. Geological Survey, which is estimated to mean undiscovered oil resources of over 15 billion barrels in the Guyana-Suriname Basin.
Based on these discoveries, Apache decided to ramp up activities in offshore Suriname, begin drilling the KesKesi well in Block 58 in September 2020, and plan a fifth, Bonboni, for the northern part of the block. In Apache's third quarter 2020 results, Chief Executive Officer and President John J. Christmann IV stated, "Apache has made a strategic decision to focus a significant portion of our upstream capital investments on our large-scale opportunity in Suriname." This underscores the substantial potential believed to hold Apache's oil reserves in offshore Suriname. Apache also announced earlier this month that it has submitted assessment plans for the Maka and Sapakara oil discoveries, while the Kwaskwasi plan is due to be submitted by the end of the year. The upstream US oil company also has a 45% stake in the neighboring Block 53, where 30% belongs to the state-controlled Malaysian energy company Petronas and the remaining 25% to the Spanish oil company Cepsa.
Apache and Total aren't the only international energy companies conducting exploration drilling in offshore Suriname. In October 2020, Petronas spat out its first well, Sloanea-1, in Block 52, in which it has a 50% stake. The remaining 50% was acquired by Exxon as part of a farmout deal with the Malaysian energy company in May 2020. This strengthens the oil super-major's presence in offshore Suriname, which began with the takeover of Block 59 in 2017. The global oil super-major's interest in the impoverished former Dutch colony after a major offshore success in Guyana speaks volumes about Suriname's oil potential. Petronas also owns 100% of Block 48.
UK-based oil explorer and producer Tullow Oil has licensed offshore blocks 47, 54 and 62 in Suriname. In 2017, Tullow announced the completion of the Araku-1 exploration well in Block 54, where the company holds 30% of the 50% owned by Equinor, Norway and the remaining 20% owned by Noble Energy. No oil was discovered, but Tullow was confident that the presence of condensate indicated the block was showing promise. Tullow announced that it will drill the Goliathberg-Voltzberg North well in offshore Suriname Block 47 in the fourth quarter of 2020. The UK-based drill continues to hope that its exploration activities will mimic the success of Apache and Total in Block 58.
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These developments suggest that exploration activity in Suriname is accelerating and receiving a solid boost from higher oil prices as Brent climbed to around $ 44 a barrel. This is significantly higher than the estimated $ 35 per barrel breakeven cost for the Stabroek block, which is adjacent to offshore Suriname blocks 58 and 42. There are all signs that drilling technology, energy infrastructure and knowledge of the Guyana-Suriname Basin are improving and break-even prices for offshore Suriname will be similar. This will make Suriname an attractive investment destination for international oil companies as crude oil is expected to be produced with a lower sulfur content than on land in South America. Suriname's state-controlled oil company and petroleum regulator, Staatsolie, announced a flat round of offshore tenders for 2020/2021 on November 16, 2020. Eight shallow water blocks are being offered spanning 13,524 square kilometers south of block 58. The data room will open on November 30, 2020 and offers are expected to be received by April 30 next year. This will open up under-explored and unused land that is believed to contain significant petroleum potential.
These are important developments for the deeply impoverished Suriname, which has been hard hit by the coronavirus pandemic. With a gross domestic product of almost 4 billion US dollars in 2019, it is one of the poorest countries in South America. The IMF forecast that Suriname's economy will shrink 13% in 2020 due to the significant impact of the COVID-19 pandemic, one of the worst declines in the region. This will create even greater poverty and put significant pressure on Paramaribo's finances. Increased oil exploration activity in offshore Suriname, coupled with the potential for a major oil boom mirroring that initiated in Guyana, could not have come at a better time. These developments will add to the considerable momentum that is driving the existing offshore oil boom in South America, making it a world leader in offshore oil. If the Suriname government can effectively leverage the country's potentially vast offshore oil wealth, its economy will grow rapidly, increase prosperity and reduce poverty in the former Dutch colony.
By Matthew Smith for Oilprice.com
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