The South American nation of Suriname is emerging as a new player in the oil industry, following a revolution in restructuring its defaulted debt and the discovery of vast oil reserves in its territorial waters. Industry giants APA Corporation and TotalEnergies have identified significant oil deposits off the coast of Suriname, leading to an innovative financial instrument known as an “oil warrant” being introduced in the debt restructuring negotiations.
This development comes at a time when neighboring country Guyana is experiencing rapid economic growth due to the discovery of large oil reserves in its Atlantic shore. Suriname, on the other hand, has seen a decline in its economy and has fallen behind compared to the broader region. However, with the recent oil discoveries, the country is looking to capitalize on its potential as an emerging oil producer.
Following a three-year default on $675 million of debt, Suriname has negotiated an agreement with its creditors to issue a new bond with a 7.95% interest rate and a portion of royalties from oil fields as part of the restructuring deal. This innovative approach, known as an “oil warrant,” allows bondholders to receive a share of future oil revenues from the country.
The offshore discoveries, particularly in the Block 58 area, are expected to be a game-changer for Suriname’s economy, which has traditionally relied on mining, primarily for gold ore. The country’s national oil company, Staatsolie, has been in existence since 1980 and is poised to benefit from the potential of up to 30 billion barrels of oil offshore.
The quality of the oil discovered in Suriname is also a distinguishing factor, with medium to light sweet crudes being of higher quality compared to those found in other parts of South America. This could lead to lower break-even costs and make the oil more attractive to refiners.
Overall, Suriname’s emergence as a player in the oil industry, alongside its neighbor Guyana, has the potential to reshape the economic landscape of the region and position it as a key player in the global energy market.