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World’s Newest Oil Hotspot Undeterred By Poor Drilling Results

After a series of notable oil discoveries in offshore Guyana and then Suriname over the last six years the impoverished South American nations became a focal point for offshore drilling on the continent. Seismic and other geological data show that the region possesses many characteristics in common with the West African margin, where the world-class multi-billion-barrel Jubilee oilfield was discovered in 2007. Guyana and Suriname, along with French Guiana, share the Guyana-Suriname Basin which is now one of the world’s hottest drilling prospects for big oil. Global energy supermajor ExxonMobil has made 18 high quality oil discoveries in the Stabroek Block offshore Guyana since 2015, estimating that they hold over eight billion barrels of recoverable crude oil resources. Exxon recently announced that the Liza Phase-1 offshore Guyana oilfield had reached planned production capacity of 130,000 barrels daily.

Liza Phase-2, which is designed to pump 220,000 barrels per day, will commence operations next year followed by the 220,000-barrel Payara project in 2024. There have been similar exploration successes in neighboring offshore Suriname. Exxon, along with partner Petronas, which is the operator, found hydrocarbons in Block 52 offshore Suriname which is adjacent to Apache’s Block 58. Since the start of 2020 Apache and partner French oil supermajor Total have made four oil discoveries in Block 58 offshore Suriname. That block is contiguous to Exxon’s prolific Stabroek Block, leading analysts to speculate that after such a solid run of discoveries its recoverable crude oil resources could be on a similar scale. U.S. investment bank Morgan Stanley believes that Block 58 could potentially hold 5.9 billion barrels of recoverable oil resources.

Those oil discoveries ignited considerable speculation that Suriname would experience an oil boom as big as that of neighboring Guyana, making the Guyana-Suriname Basin one of the hottest offshore drilling prospects in the world today. That is enhanced by the basin’s low breakeven prices which analysts estimate to be $35 per barrel for offshore Guyana and $45 for Suriname. Those prices will fall further as additional oil discoveries are made and new infrastructure is developed to facilitate the extraction of the crude oil, which sees some analysts estimating they could fall to as low as $23 per barrel produced. Aside from those discoveries, the tremendous potential held by the Guyana-Suriname Basin is further illustrated by the U.S. Geological Service which in 2001 estimated that it held up to 32.6 billion barrels of undiscovered crude oil resources. That made it the third largest oil basin of undiscovered oil resources in South America after Brazil’s offshore Santos and Campos Basins. The latest drilling news however, from offshore Guyana and Suriname does not bode well for the oil boom that is underway. Independent exploration and production company Tullow Oil recently announced that its much-hyped Goliathberg-Voltzberg North exploration well in offshore Suriname Block 47 only showed minor oil flows. According to the company there were no commercially viable hydrocarbons to extract and it chose to plug and abandon the well. This is a disappointing result for a heavily hyped wildcat well targeting a potential oil discovery of up to 235 million barrels with a 34% chance of geological success. Total and Apache earlier this month disclosed the cessation of operations at the Keskesi East-1 well, their latest oil discovery in Block 58 offshore Suriname, after significant pressure increases exceeded well design.

These latest events come on the back of a slew of recent poor drilling results in the Guyana-Suriname Basin. Earlier this month Exxon failed to find commercial quantities of hydrocarbons with its Bulletwood-1 well in the Canje Block offshore Guyana. The global energy super major also drilled a dry hole, the Hassa-1 well, in the prolific Stabroek Block. During November 2020 Exxon discovered heavy oil with the Tanger-1 well in the Kaieteur Block offshore Guyana, but found it was uneconomic to exploit and the company plugged and abandoned the well. Tullow, in January 2020, made an uncommercial oil discovery in the Kanuku Block offshore Guyana. This comes on the back of an earlier boatload of dry holes drilled over the past five years. These include Tullow’s 2017 2,685-meter Araku-1 exploration well in Block 54 offshore Suriname which came up dry. In 2018 Kosmos drilled two wells in Blocks 42 and 45 offshore Suriname which also proved to be dry. The portion of the Guyana-Suriname Basin in nearby French Guiana has failed to deliver any commercially exploitable oil discoveries seeing it essentially abandoned by oil companies.

While the poor drilling results from the Guyana-Suriname Basin are a concern, especially because of the high number of dry holes, they have done little to blunt the enthusiasm surrounding the basin’s prospects. Industry consultancy Rystad Energy predicts a record 16 wells will be drilled in offshore Guyana during 2021. The latest Baker Hughes international rig count supports that assertion. It shows four active drill rigs in Guyana at the end of February 2021, which is the highest number since August 2020, and two operational drill rigs in Suriname.

There is mounting speculation that Guyana’s government will launch a new oil licensing round during 2021. In November 2020 Suriname commenced its shallow offshore bid round offering eight offshore blocks with bids due by 30 April 2021. Prior to completing the disappointing Goliathberg-Voltzberg North well Tullow confirmed its commitment to Suriname. In recent news, Tullow and its partners received an extension, until 2023, for the Orinduik Block offshore Guyana, which is contiguous to the Stabroek Block. Apache and Total intend to continue their Suriname exploration program despite the issues encountered with the Keskesi East-1 well. Apache has budgeted $1.1 billion for 2021, which is an 11% increase over 2020 spending, with $200 million earmarked for exploration activities with Suriname a key focus. Apache’s partner, and the operator of Block 58, French oil supermajor Total has allocated $800 million for 2021 exploration activities. Total also intends to focus on the Guyana-Suriname Basin and is targeting first oil from Block 58 during 2025. Recent poor drilling results and high volume of dry holes are a cause for concern but both Guyana and Suriname will remain hot offshore drilling prospects for the foreseeable future. A combination of low forecast breakeven prices, favorable regulatory environments and an estimated high volume of undiscovered recoverable oil resources make the Guyana-Suriname Basin a highly attractive offshore drilling location.

Source: OilPrice.com | This text was excerpted from the media outlet cited on March 24, 2021 and is provided to Noia members for information purposes only. Any opinion expressed therein is neither attributable to nor endorsed by Noia.