Up until recently, Guyana and Suriname were practically out of the oil and gas industry’s radar in spite of their proximity to oil reserve-rich Venezuela. But that quickly changed in 2015 when ExxonMobil’s (NYSE: XOM) joint venture spotted massive reservoirs in its Guyana offshore acreage. Its Liza discovery made headlines beyond oil and gas media outlets.
On top of that, the American oil giant recently snagged a new deepwater block along with Hess Corp. (NYSE: HES) and Statoil (NYSE: STO) off Suriname’s coast, which is along a maritime border where Guyana blocks have already proven world class potential.
Combined, these recent developments are what some call the birth of a new oil region—the Guyana-Suriname Basin—with never before seen assets that could easily outpace other developments in the Caribbean, including economically sunk Venezuela.
On July 25, with partners Hess and CNOOC, ExxonMobil announced a new find at its Liza Field on top of the originally estimated 1.5 billion barrels of oil equivalent. Analysts have long expected the consortium’s exploration program at Liza to be highly successful, but this new well proves there are plenty of untouched riches available for other industry players in the future.
Around the corner from Guyana’s prolific Stabroek Block with 6.6 million acres—the country’s crown jewel—is Block 59, the Suriname gem with 2.8 million acres. The potential of Suriname’s blocks is still unknown, but the fact that operators are digging in as Liza pours oil out offers plenty hope.
Additional exploratory potential in the entire region lies in the Payara and Snoek prospects as well as deeper Liza reservoirs.
Pablo Medina, Latin America upstream analyst at Wood Mackenzie, considers the ramifications of the recent Payara find to be huge for the region.
“The fact that the delimitation of Payara has been a success confirms Liza’s magnitude and potential discoveries in Stabroek Block. What we are seeing is only the beginning of many more finds in the sense that the block is really large,” he said. “There are many prospects that are yet to be drilled on, apart from new ones that can be found.”
Production costs in this new oil frontier are also expected to make it very profitable when compared to other countries’. “Liza has one of the lowest breakeven costs in industry’s deepwater projects. Even though deepwater may not be fashionable anymore [due to generally high production costs], there are key opportunities to look at when developing a field, and Liza has them.”
Medina said costs hover the low US$40s. In the case of Guyana, where gross earnings royalties are set at 2% and the government will take 50% of profits, Liza is still a very profitable venture.
If Suriname follows suit, a similar government and industry deal could usher newcomers.
“It can only get better as new discoveries are made,” Medina said. “There’s an upside.”
It is too early to say whether ExxonMobil will look to combine its Guyana and Suriname wells into a massive production hub in the future, but Medina thinks it would be interesting to see the same exploratory success story play out in Suriname.
“Without a doubt, industry’s eyes are now looking at that possibility. And it is worth noting that Guyana is one of the largest offshore discoveries in recent years,” he said.
However, the region’s crude market is still yet to be revealed. Plans of a Guyana refinery seem to have faded away as internal markets would not make it entirely feasible, according to Medina. And given Liza’s magnitude, production and export logistics can also get tricky, he said.
“There’s still some time for first oil to come. But this is one of the regions with the most exploratory activity in Latin America,” he said. “We consider that is a very interesting area that industry should keep an eye on.”