Suriname’s Resource Boom is Back on Track With First Oil Targeted for 2028

Former Dutch colony Suriname shares the offshore Guyana Suriname Basin with the former British colony of Guyana, which is reaping a massive economic windfall from one of South America’s largest oil booms of recent times. Suriname’s government in Paramaribo is hungrily eyeing Guyana’s oil boom, which has propelled the country into the global league of major oil-producing and exporting nations, putting it on track to become one of the wealthiest nations in South America.

Deeply impoverished Suriname, which is suffering an extreme economic crisis, hopes to enjoy a similar boom to its neighbor. Nonetheless, time is running out to successfully exploit the vast petroleum resources lying beneath Suriname’s territorial waters as the global battle against climate change and push to net zero emissions gain momentum.

The shock 2022 announcement from TotalEnergies, the operator, and 50% partner APA Corporation that the final investment decision (FID) for Block 58 offshore Suriname was delayed nearly dashed Paramaribo’s plans. The government, which is experiencing significant economic pressure, views Suriname’s substantial offshore petroleum wealth as a silver bullet for the former Dutch colony’s financial woes.

This notion emerged after APA announced the first discovery in Block 58 offshore Suriname at the Maka Central-1 wildcat well in early January 2020. By late-2020, analysts were speculating that Block 58 possessed significant petroleum resources, with U.S. investment bank Morgan Stanley stating that its modeling showed the acreage could contain as much as 6.5 billion barrels of oil. An additional four world-class discoveries were made by March 2022, further supporting those claims.

Those events strengthened the belief that Suriname was on track to experience a mammoth oil boom capable of delivering a major economic windfall, thus ending the country’s protracted economic crisis and lifting it out of poverty. Those events sparked speculation that Block 58 contained petroleum resources on a scale similar to the neighboring Stabroek Block in offshore Guyana, where ExxonMobil has found 11 billion barrels of oil resources. It is the Stabroek Block that is driving Guyana’s epic oil boom and made the former British colony South America’s wealthiest country on a per capita basis. 

Paramaribo’s aspirations were almost dashed when TotalEnergies and APA delayed the FID for Block 58, which was originally expected during 2022, with first oil to be delivered sometime in 2025. TotalEnergies made this decision for several reasons, the key being the high gas-oil ratio and a swathe of poor exploration results that did not match earlier drilling outcomes or seismic data. Concerns over the commerciality of existing discoveries coupled with rising political tensions and a worsening economic crisis, with protestors storming Suriname’s parliament during February 2023, amplified the French supermajor’s uneasiness. Indeed, it those events which prompted TotalEnergies to delay the FID, especially with a substantial investment of $9 billion or more, with some analysts claiming it could take $11 billion, to bring Block 58 to first oil.

It was originally believed that TotalEnergies and partner APA would approve the FID by the end of 2022, with first oil expected during 2025. After a lengthy delay, with TotalEnergies, as operator, continuing to conduct appraisal drilling and assessing the five discoveries made since 2020, the partners announced during 2023 a commitment to undertaking development studies, which is typically a precursor to a FID. TotalEnergies and APA have flagged that this decision will be made by year-end 2024. The partners have identified a 700-million-barrel recoverable resource connected to the Sapakara and Krabdagu discoveries. Once detailed engineering studies are complete and the FID is made, the partners plan to install a floating production storage and offloading (FPSO) vessel in Block 58 with the capacity to lift 200,000 barrels per day. There are indications that TotalEnergies and APA are moving as quickly as possible to ensure the $9 billion project is sanctioned by the end of 2024. 

The oil discovered in Block 58 is particularly attractive to exploit for Big Oil because it is light, with an API gravity of around 34 degrees, and sweet with a low sulfur content making it cheaper and easier to process into high-quality low-emission fuels. Those are particularly important characteristics in a global economy where emissions standards are constantly ratcheted higher because the push to slow global warming and halt climate change gains momentum. If Guyana’s Stabroek Block is any indication, the carbon intensity of lifting oil in offshore Suriname will be relatively low, enhancing its attractiveness for Big Oil at a time when the industry is being forced to implement a net-zero standard. 

Offshore Suriname’s low projected breakeven prices must also be considered. Forecasts vary with analysts indicating that the breakeven price for each barrel lifted could be as high as $45 per barrel or as low as $35, with a consensus average of $40 per barrel for offshore Suriname.While this is higher than offshore Guyana, with an average breakeven price of an industry low of $28 per barrel, it is less than other offshore jurisdictions such as Brazil, where production breaks even at an average of around $50 per barrel for downstream offshore projects. There are claims that Block 58’s breakeven price will fall from an initial $45 per barrel produced to a low of $25 a barrel, which will be among the lowest in South America, as infrastructure is built out and operational synergies implemented.

There is considerable financial and socioeconomic pressure on Paramaribo to exploit the substantial petroleum wealth thought to lie beneath Suriname’s territorial waters. While the global rush to phase out fossil fuel consumption to combat climate change adds a sense of urgency to the former Dutch colony’s plans to extract those resources, time pressures are not as severe as some pundits claim. Suriname’s offshore oil resources are particularly appealing to Big Oil, because of a low carbon footprint to extract as well as refine and favorable costs with a $40 per barrel breakeven price, making production highly profitable in the current environment. Paramaribo has also implemented an appealing regulatory environment that ensures drillers are not only rewarded for investing in offshore Suriname but, through a 10-year contract, have sufficient time to explore and exploit the acreage once production begins.