Suriname Could Be Latest Big Oil Find as Industry Cuts Costs

The small South American country has become a hot prospect for oil companies looking to produce fossil fuels while spending less.

By Clifford Krauss

The Atlantic waters off Guyana have become one of the world’s hottest oil-drilling zones. Now, international oil executives are looking at neighboring Suriname.

Exxon Mobil, Royal Dutch Shell, Total, Apache and several other companies are gearing up operations off Suriname’s coast. They hope that the South American country, which recently emerged from decades of authoritarian and corrupt governments, will be the next great oil source.

But the world has more than enough oil, and prices for petroleum products are relatively low. In addition, investor interest in oil companies is waning as concerns about climate change give momentum to electric vehicles and renewable energy.

Those concerns are not hampering interest in Suriname. Oil companies say they can make money there with oil prices as low as $30 to $40 a barrel because of lower costs. That is roughly equivalent to the threshold in Guyana and well below today’s oil price. It is also below break-even levels in many places, including some U.S. shale fields, where costs usually add up to nearly $50 a barrel.

One reason it is easier to make money is that Suriname demands a smaller cut from oil companies than several other Latin American countries, including Brazil, Bolivia and Mexico. Suriname wants to attract investment and jump-start a troubled economy, which the International Monetary Fund expects to contract by 13.1 percent this year, and fix its ailing finances.

The 30-year production-sharing agreements that Suriname is offering oil companies are also about five to 10 years longer than those offered by other Latin American nations, giving companies more time to invest, discover and produce.

“Suriname could be big,” said David Goldwyn, a consultant who was the top State Department energy diplomat in the early years of the Obama administration. “Under almost any scenario the world is going to be using less oil over time. The winners in the race to share what remains of the oil pie will be those who can produce oil at low cost.”

The recent pickup in interest in Guyana and Suriname is somewhat surprising because their promise as oil producers has often come up empty. Companies drilled more than 100 unsuccessful wells there, mostly in shallow waters, from 1950 to 2014. But after rich fields were found in the deep waters off Brazil, Exxon Mobil and other companies returned to take another look. Exxon struck a gusher in Guyanese waters in 2015, opening the current flurry of exploration.

Suriname, Guyana and Brazil are now attracting more new investment than the Gulf of Mexico and other more established oil fields. And they are helping to keep global oil prices relatively low, undermining efforts by Russia and its allies in the Organization of the Petroleum Exporting Countries, like Saudi Arabia, to manage global supply and push up prices.

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