The deeply impoverished South American country Suriname was sharply impacted by the 2020 pandemic and has yet to recover. A snowballing economic crisis that took hold in the wake of the pandemic can be blamed on years of fiscal mismanagement, malfeasance and corruption during the years when convicted murderer and narcotics smuggler Desi Bouterse held power. The government of Bouterse’s successor President Chan Santokhi who had hoped to resurrect the economy through an oil boom mirror neighboring Guyana’s, is under considerable pressure. Paramaribo’s hopes of this occurring in the near term were quashed by French energy supermajor TotalEnergies’ 2022 choice to delay the final investment decision (FID) for offshore Block 58. There are signs the postponed oil boom is seemingly back-on-track, offering a glimmer of hope to an embattled government in the capital Paramaribo.
The focal point for Suriname’s nascent oil boom is offshore Block 58, where TotalEnergies, which is the operator, and 50% partner Apache have made five commercial oil discoveries since January 2020. The most recent discovery occurred during February 2023 with the Sapakara South-2 appraisal well. Successful appraisal drilling on Block 58 has identified considerable resource pools for TotalEnergies to exploit. While Block 58 is estimated to hold as much as 6.5 billion barrels of oil resources, TotalEnergies has identified more than 200 million barrels of oil resources attached to the Sapakara discovery. This positive news comes after disappointing exploration results regarding the Awari and Dikkop wildcat wells which were dry.
It does, however, remain uncertain as to when TotalEnergies and Apache will make the FID, although it is expected at some time during 2024. That will push back for the timeline for Suriname’s oil boom, with first oil originally anticipated to occur during 2025. The FID was delayed because of concerns over a mismatch between seismic data, and drilling results, with a number of dry wells drilled contrary to expectations and a high oil-to-gas ratio. If Exxon’s experience with the Liza oilfield is any indication, which took roughly two years to bring to first oil after the development was approved; if the FID is made during 2024, then first oil should be expected in 2026 or 2027. Related: Europe’s Natural Gas Prices Rise On Abnormally Warm Summer
TotalEnergies is targeting two discoveries in Block 58 for development. There is the April 2020 Sapakara West-1 oil discovery, where considerable appraisal drilling has been undertaken. In late-2021, it was announced that flow testing at the Sapakara South-1 appraisal well had been completed, with a single reservoir holding 325 million to 375 million barrels of oil in place identified. In February 2023, the successful flow testing of the Sapakara South-2 well was announced, with 200 million barrels of oil in place identified. This gives the Sapakara discovery at least 525 million barrels of oil resources to be exploited by TotalEnergies and Apache.
There is also the June 2022 statement that flow testing was successfully conducted at the Krabdagu wildcat well, located 11 miles southeast of the Sapakara South well, where a discovery was announced in February 2022. Appraisal drilling identified two reservoirs with combined resources of 180 million barrels located in the Upper and Lower Campanian intervals. While that is certainly promising news further supporting the planned development of Block 58, it appears that the Sapakara discovery will be the first to be exploited by TotalEnergies and partner Apache.
Despite the complications associated with Block 58, which forced TotalEnergies to delay the FID, there are signs offshore Suriname and the discoveries made to date will be a highly profitable venture. The hydrocarbons discovered with the Sapakara well are a light and sweet black oil with an API gravity of 34 degrees. Lighter, sweeter crude oil grades are experiencing higher demand because they are easier and cheaper to refine into high-grade, low-emission fuels. Furthermore, the estimated breakeven price for offshore Suriname is believed to be around $40 per barrel, Brent. This underscores the profitability of lifting oil in Suriname, especially with Brent trading at around $74 per barrel, at the time of writing.
Suriname’s average breakeven price will fall over time as more discoveries are made and crucial industry infrastructure is built out. The country’s low estimated breakeven price makes it a competitive and profitable jurisdiction for energy companies when compared to other countries in South America. Offshore Brazil, which produces predominantly medium-sweet crude oil from ultra-deepwater pre-salt fields, has an estimated breakeven price of $35 to $45 per barrel. Then there is the prolific Vaca Muerta shale play in Argentina, which is driving that country’s oil boom. Industry sources believe that the breakeven for the Vaca Muerta has fallen from around $55 per barrel to between $35 to $40 a barrel. Suriname’s forecast breakeven price is also lower than Colombia, Ecuador and Peru.
Suriname is, however, running out of time to exploit the considerable oil potential held by its territorial waters. The growing push to decarbonize the global economy and the ever-closer threat of peak oil demand are weighing on big oil’s decision-making. There is also considerable pressure being brought to bear on energy companies to reduce their carbon emissions, further impacting investment in oil exploration and the development of new projects. For these reasons, there is a sense of urgency being expressed by Suriname’s national oil company Staatsolie for TotalEnergies and Apache to exploit Block 58.
That urgency is amplified by Suriname’s economic crisis, which, despite harsh IMF-imposed economic reforms, is worsening. Inflation has soared into double digits, with it reaching a worrying 65% for May 2023, and there are fears it will spiral higher. This is causing the cost of living in the country of less than one million to soar, straining already deeply impoverished households. That, in turn, is causing political dissent to rise and fueling violent anti-government protests. Those events see Paramaribo aggressively promoting the exploitation of Suriname’s vast petroleum potential with an offshore oil boom seen as an economic silver bullet by an increasingly fragile government.
By Matthew Smith for Oilprice.com
- Russia’s Crude Oil Exports Dip By Nearly 1 Million Bpd
- Flash Droughts: Climate Change’s Next Big Blow
- Investors Wary As Beijing's Stimulus Strategy Falls Short