Head of Malaysia’s Petronas, Zamri Baseri, is quoted by Reuters as saying the company needs to speak to Staatsolie – Suriname’s state oil company – about the commercial models that can be used to make a project at block 52 viable. Petronas, in a joint venture with ExxonMobil, has made two discoveries there and is now seeking greater incentives toward a potential development.
According to the Reuters report, Baseri did not specify the incentives his company is looking for. However, Reuters noted that lower royalties and taxes, or commercial incentives often hasten investment decisions by energy companies.
“We need to speak to Staatsolie on what kind of fiscal arrangements we can have, the commercial models we can have to make the project fly,” Baseri is quoted as saying.
Over in Guyana, while some advocates continue to push for the Stabroek Block production sharing agreement (PSA) with ExxonMobil to be renegotiated, they often hail Suriname’s model terms. The current terms of the Stabroek PSA, considered by some to be too generous to the oil companies, include a royalty rate of 2%, a 50-50 profit split, and a 75% cost recovery ceiling.
This framework has been a catalyst for substantial investment by ExxonMobil, which is advancing six large-scale projects. Total production from the first three projects is currently over 550,000 barrels per day and is expected to surpass 600,000 barrels per day this year.
In contrast, Suriname’s model contract terms impose a higher royalty rate of 6.25%, a profit split that varies between 30% and 50% and a cost recovery ceiling of 80% on companies.
With these terms, increased investments offshore, including a final investment decision by TotalEnergies and APA Corporation at Block 58, have been slow in coming. After much delay, TotalEnergies and APA are expected to proceed this year with a US$9 billion investment targeting 700 million barrels of oil.
According to Reuters, Baseri said the headwinds faced by a potential block 52 development include the relatively small size of the discoveries and the country’s lack of offshore infrastructure.
Petronas will drill another well in block 52 this year. In addition to discoveries at the Roystonea-1 and Sloanea-1 wells in block 52, Petronas is a partner in block 53, where APA struck oil in 2022. But there has been no move to develop.