OVER the past few years, Guyana and Suriname have announced mammoth hydrocarbon discoveries offshore. Guyana’s reserves are now estimated at nearly 11 billion oil equivalent barrels while some preliminary reports estimate that Suriname might have as many as six billion. But while Guyana’s series of discoveries offshore have rapidly translated into production, revenues and jobs, Suriname’s offshore discoveries have not yet contributed significantly to its economy, despite talks of their potential.
Suriname grew by just 1.9 per cent last year, despite its recovery from the COVID-19 pandemic. Guyana’s growth was more than 10 times that. Most significantly, despite major discoveries, Suriname has had no companies make final investment decisions (FID) about investing offshore—the most significant step of commitment for oil development. Just this past week, FID on two major projects were postponed.
Meanwhile, Guyana has seen FID on four projects with two already producing oil and generating revenues—a step that remains years away for Suriname. Oil and gas production has been on a steady upward pace with total production at more than 300,000 barrels per day and set to increase to just under 350,000 barrels per day by the end of the year.
With two more projects expected to start producing by 2025 and up to ten floating production storage and offloading (FPSOs) systems operational by the end of the decade, development output could reach 1.1 million barrels per day by 2028.
Suriname has traditionally taken an approach different to Guyana’s, with state-owned Staatsolie participating directly and investing taxpayer funds in exchange for a larger stake in production when it occurs. Suriname has had a small amount of onshore oil production since 1982 but significant offshore discoveries weren’t made until the last few years.
Suriname has been hailed by some in Guyana as an example of how to squeeze a greater share of profits out of oil companies. But it’s also a cautionary tale in many ways. Guyana already has more than US$700 million in its Natural Resources Fund. According to a recent report from analysts at Rystad Energy, the average government take moving forward should be around 59 per cent of profits or 14.5 per cent of overall revenues, when both the pre-cost royalty and the post-cost profit sharing are accounted for.
In 2022, Rystad expects revenues from oil production to surpass US$1 billion and average US$3.6 billion per annum through 2030 (and US$12.4 billion annually between 2031 and 2040.)
Right now, Suriname only has 40 per cent of its offshore blocks licensed. Suriname’s Block 58 is the most important of its licences with Apache Corporation and TotalEnergies both holding a 50 per cent working interest and several discoveries. But the country is still playing catch-up to Guyana. The government is unlikely to receive any revenues from offshore production before 2025 and companies remain suspicious that the investment will be worthwhile.
This has left Surinamese companies which are eager to join the industry, in limbo, while the government struggles with an ongoing financial crisis, in sharp contrast to the double-digit growth that Guyana has experienced over the past several years.
Though Staatsolie’s participation in development and Suriname’s fiscal terms are sometimes held as an example, it’s critical to understand that those terms are purely hypothetical. Currently, no company has actually agreed to develop the reserves and Suriname is unable to do so alone.
Meanwhile in Guyana, ExxonMobil made its FID on the US$10 billion Yellowtail development in April, thereby making it ExxonMobil’s fourth development on the Stabroek Block and the largest single investment in Guyanese history.
In the short period that Guyana has been an oil producing nation, it has also managed to implement policies and legislation that Suriname is only now considering, such as the local content law and the sovereign wealth fund act.
Suriname stands to gain much from Guyana’s rapid development as it moves towards developing these fields. Hopefully it will benefit the most from watching Guyana’s development over the next decade and mirroring its legislation, workforce development efforts, and the partnerships that are shaping its rapid growth.