After five commercial oil discoveries in Surname's offshore Block 58, the government in Paramaribo was optimistic the tiny, impoverished country was on track to enjoy an oil boom on the scale of neighboring Guyana. That was dealt a blow after TotalEnergies, which with a 50% interest, is the operator of Block 58, was dealt a massive blow after the supermajor chose to delay the final investment decision (FID), which was expected during 2022 or 2023. This decision occurred because drilling results did not match seismic data, while many discoveries were found to have high gas-to-oil ratios. TotalEnergies was also concerned by the worsening political and economic crisis in Suriname, where protestors stormed the former Dutch colony's parliament earlier this year. Recent developments, however, point to Suriname's oil boom being back on track, with the FID now expected next year.
Recent drilling results from Block 58 have been promising, indicating that initial expectations, including estimations the block contains up to 6.5 billion barrels of oil, were indeed correct. In early February 2023, APA Corporation announced successful flow testing at the Sapakara South discovery. The Sapakara South-2 appraisal well, the second such well to be drilled at the discovery, found 118 feet of net oil pay in the high-quality Campano-Maastrichtian reservoir, with data indicating there are more than 200 million barrels of oil in place. That came after successful flow testing with the Sapakara South-1 well. In November 2021, APA disclosed that the appraisal well discovered 98 feet of net black oil pay in a single zone of high-quality Campano-Maastrichtian reservoir where it was identified that there are 325 million to 375 million barrels of oil in place.
During mid-2022, the Krabdagu exploration well, where oil was discovered in February 2022, was flow tested with 110 feet of net oil pay identified in the Campanian interval, which is estimated to have over 180 million barrels of oil in place. The Krabdagu exploration well is located 11 miles west of the Sapakara South discoveries. In early May 2023, it was announced that flow testing of the Krabdagu-2 well was complete, and data analysis was underway, while the Krabdagu-3 appraisal well was underway.
Block 58 Offshore Suriname Oil Discoveries
Source: APA Corporation.
According to Apache, there are over 800 million barrels of oil in place across the combined Sapakara and Krabdagu wells. The Sapakara oil discovery has an API gravity of 34 degrees, with it thought to possess similar characteristics to the Liza oil grade being pumped from the Stabroek offshore Guyana, which has an API of 32 degrees and 0.52% sulfur. It is also anticipated that the petroleum discovered in Block 58 will, like the Stabroek Block, have a relatively low carbon footprint to extract, which is important n the current economy where there is considerable pressure on oil companies to make their operations carbon neutral.
Industry analysts believed the Sapakara discovery would be developed initially, but TotalEnergies CEO Patrick Pouyanné revealed in the first quarter 2023 results that the company will develop an oil hub comprised of the Sapakara and Krabdagu discoveries. Pouyanné went on to say that TotalEnergies has identified a pool of 500 million barrels of oil, and when the last well is complete with 600 million to 650 million barrels identified, then the supermajor will proceed to development. Based on these statements, the FID for Block 58, which was originally expected during 2022 or 2023, will likely be made during 2024, with the first oil slated for 2027. Interestingly, APA in its first quarter 2023 results, claimed that the partners had detected a combined volume of over 800 million barrels of oil in place from the Sapakara and Krabdagu discoveries. While APA's resource estimate is far higher than TotalEnergies', it does support the view that the FID for Block 58 will be next year.
These developments bode well for Suriname, which is a deeply impoverished South American country caught in a vicious economic crisis that is sparking considerable political conflict and uncertainty. For that reason, Paramaribo is desperate for Block 58 to be developed and proceed to first oil in the hope of benefiting from an economic boom on the scale of that occurring in neighboring Guyana, where gross domestic product grew 62% during 2022. Suriname's economy is lagging behind most counties in the region where, with the exception of Venezuela, have experienced a strong post-pandemic recovery. IMF data shows Suriname's GDP grew by a mere 1.3% last year and is forecast to expand by 2.3% in 2023.
An oil boom that bolsters the economy will alleviate the economic hardship being experienced in Suriname, with the government forced to impose tough IMF-mandated austerity measures after defaulting on the country's sovereign debt. Those reforms, which triggered spiraling double-digit inflation and caused the cost of living to rise sharply, are causing considerable suffering for everyday people, with it estimated that as much as 70% of Surname's population lives in poverty. While oil has pried open the door for an economic recovery, time is running out for Paramaribo to exploit what is thought to be Suriname's vast offshore hydrocarbon wealth. The looming threat of peak oil demand makes it essential for Paramaribo to access that petroleum wealth as soon as possible to head off a building economic as well as political crisis.
By Matthew Smith for Oilprice.com
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… More
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