Suriname Oil Boom Back on Track as New Discoveries Excite Investors
Suriname’s President Chan Santokhi had pinned his hopes on a massive oil boom to reinvigorate the former Dutch colony’s crisis-prone economy. Those hopes were dashed when French energy supermajor TotalEnergies delayed the billion-dollar final investment decision (FID) for Block 58 offshore Suriname. Concern over drilling results and a high gas-to-oil ratio for the five discoveries made since 2020 were cited as the reasons for the delay. That delay, with the FID originally slated for 2022, has delayed the first oil in Suriname, which in recent years has been roiled by political unrest and a deep economic crisis. This is weighing on the national government in Paramaribo, which is struggling with a debt crisis and extreme double-digit inflation.
The origin of Suriname’s economic crisis can be found in the 10-year regime of former president and convicted murderer Desi Boutrese. Rampant corruption, malfeasance and excess spending left Suriname in a fiscally weakened state that was exacerbated by the 2020 pandemic, which hit the South American country of less than seven hundred thousand particularly hard. Suriname lingered in debt default for more than three years, with Paramaribo forced to obtain a $688 million bailout from the International Monetary Fund (IMF) in exchange for implementing mandated economic reforms to rein in spending. Key to those measures was Paramaribo floating the Suriname dollar, removing fuel subsidies, reining in public wage spending and implementing a plan to phase out electricity subsidies.
Those reforms, along with a spiralling cost of living and rampant double-digit inflation, triggered by the central bank devaluing the Suriname Dollar by 30% prior to it being floated, sparked riots where protestors stormed the National Assembly. Those events sparked fears of rising political instability in a country of around 600,000 people, where over 40% live in poverty. It was feared that heightened instability would derail efforts to renegotiate Suriname’s sovereign debt, although Paramaribo was able to strike a deal with creditors during May 2023. A full-blown political crisis will also exacerbate Suriname’s economic plight, which is sharply impacting the former Dutch colony. Inflation remains extremely high, hitting a worrying 65.4% for April 2023 and then declining to 54% during June 2023. This is weighing heavily on Paramaribo’s planned economic recovery while causing the cost of living to spiral out of control.
While there are signs of some hard-fought economic victories emerging, Suriname’s economy is still weighed down by the excesses of the Boutrese years and the fallout from the 2020 pandemic. It is for these reasons President Santokh is hungrily eyeing the vast petroleum wealth believed to be contained beneath Suriname’s territorial waters. Paramaribo hopes to replicate the tremendous oil boom underway in neighbouring Guyana, which is benefiting from a massive petroleum-driven economic windfall that saw the former British colony emerge as the world’s fastest-growing economy. Those plans were delivered a harsh blow in 2022 when TotalEnergies delayed the crucial billion-dollar FID required for developing Block 58 offshore Suriname.
The development of Block 58, after a lengthy delay, appears back on track. TotalEnergies 50% partner in the block APA Corporation, consistently reported solid results for the appraisal wells being drilled at the Sapakara and Krabdagu discoveries.
In the latest development, appraisal drilling at the Krabdagu-3 well confirmed the resource identified by the Krabdagu discovery well extends 14 kilometres to the south. The data gathered from the Krabdagu discovery and appraisal wells is being analyzed to determine the size of the petroleum fairway identified, which APA claims is greater than 25 kilometres. According to a February 2023 statement by APA, more than 800 million barrels of oil resources have been identified at the Sapakara and Krabdagu discoveries. In APA’s second quarter 2023 results, the company stated an oil hub project for the Sapakara and Krabdagu discoveries is currently being scoped. APA is also pursuing establishing an LNG platform in offshore Suriname. The gas, which will be a byproduct of drilling in offshore Suriname, will initially be reinjected to enhance oil recovery with a view to exporting LNG in the long term.
For some time, there has been considerable speculation that the prolific petroleum fairway contained in the Stabroek Block offshore Guyana extends through the northern segment of the neighbouring Corentyne Block into Block 58.
The latest drilling results announced by APA coupled with the Kawa-1 and Wei-1 discoveries made by CGX Energy in the northern section of the Corentyne Block indicate this could very well be the case. If that assumption proves correct, it will support earlier estimates that Block 58 could contain as much as 6.5 billion barrels of exploitable oil resources. That will make the block an invaluable asset that is capable of supporting an oil boom in Suriname on the scale that is being enjoyed by Guyana.
