EARLIER this month, oil companies Total and Apache announced their first significant offshore find in Suriname, just across the maritime border from the prolific Stabroek Block where ExxonMobil has already made 15 discoveries.

France-based Total, one of the world’s largest oil companies, bought a 50 per cent stake in Suriname’s Block 58 in late 2019, likely due in part to the immense success in Guyana. Total paid its new partner, Apache, to be a part of the block that they have been exploring in Suriname since 2015.

The Maka-Central 1 well was described as a “significant” find by both companies. Apache executives told the Financial Times that their results indicated “the potential for prolific oil wells” in the 1.4-million-acre block.

This is Suriname’s first offshore find, but the country has been an oil producer for years from three small fields on its coastal plain. The biggest, Tambaredjo, has been producing since the 1980s. Suriname’s output has steadily hovered around 20,000 barrels per day. This documented history of oil production was one major benefit from the perspective of international oil companies.

Nevertheless, that production figure is about one tenth of what Liza Phase 1 alone will produce. Before the new find offshore, Suriname’s remaining reserves stood at about 87 million barrels, according to Geoscience and Technology Explained, an industry magazine. Suriname has a small refinery outside Paramaribo and a national oil company (NOC), Staatsolie.

Suriname shares much of its geology with Guyana. Both are part of the geological formation called the Guiana Shield which stretches between the Orinoco and the Amazon rivers and includes eastern Venezuela, Guyana, Suriname, French Guiana, and northern Brazil.

Naturally, many Guyanese are curious what the contract terms were in our neighbour’s case and what it might get for any oil it produces.

Suriname is not normally considered a “peer” country with Guyana. Even though it is our neighbour, its long history of oil production, infrastructure and industry experience puts it in a different category. For example, having Suriname’s NOC, Staatsolie, means that many of Suriname’s contracts and exposure to the industry will vary greatly from Guyana, where there is no NOC.

All of this makes it difficult to compare contract terms directly. Instead, countries that are just starting out as oil and gas producers like Mozambique, Mauritania, and Israel, can be more helpful comparisons.

Suriname doesn’t publicly release its production sharing contracts, as Guyana did, but its draft contract framework shows that Staatsolie has a contractual option to buy up to a 20 per cent stake of a project. In other words, the Surinamese government will help with the substantial costs of exploration and production—something Guyana has avoided as the oil companies pay all the upfront costs.

Guyanese media have correctly cited the fact that Suriname apparently receives a 6 per cent royalty and up to 36 per cent corporate income tax but have failed to address the critical issue of profit sharing.

Under Guyana’s current contract with Exxon, we will receive a 2 per cent royalty and 50 per cent of all profits. It appears that in Suriname’s case, the maximum profit sharing it could get would be 20 per cent, and only if Staatsolie shared in the costs of the project up front. If it didn’t, Suriname would not receive any cut of the profits, just normal business taxes and a royalty. That might mean that Suriname’s overall government take is lower than Guyana’s, especially if profits are high.

Analysts and other oil companies are eagerly awaiting more information about the discovery. Apache is set to drill the next two wells on the block, after which Total will take over as operator. Neither company has released an estimate yet for just how big the find might be.

But any significant find will help prove that the incredible value of the Guyana Basin is only just being discovered. If Suriname’s offshore territory does indeed hold considerable reserves, it may have a considerable impact on the valuation and outlook of Guyana’s industry.