Staatsolie’s strategy for sustainability

What is Staatsolie’s presence in Suriname?
With high oil prices, Staatsolie expanded aggressively, looking for oil onshore and nearshore, and we also built a brand new refinery that is currently making ultra-low-sulphur diesel and petrol to feed the Surinamese market. We opened petrol stations and expanded our retail side. We then got involved in power generation. We are now the second-largest supplier in Suriname for petroleum products and we supply about one-third of the country’s power.
Staatsolie produces around 6 million barrels of oil annually. Suriname uses around 5 million barrels, which makes Staatsolie a net exporter of oil and oil products. We make an abundance of diesel and fuel oil, but we are short on petrol, so part of those sales are imported. This is advantageous because it gives the government the feeling that they can start subsidising either diesel or petrol. We have about 40% of the retail market, 100% of the diesel market with our refinery and about 40% of the petrol market.

How will Staatsolie define its E&P priorities?
We have taken steps based on what we call our strategy for success. One of the items under this idea is that for every investment we make, we should have in mind living in an environment of low oil prices for longer, or forever. All of our investments will vary based on oil prices of USD 40-60 per barrel in the long term.
We must also remain where we are, in the lowest-cost quartile. Even if we have this magnificent oil find offshore, we will not invest if the operator and developer cannot prove that we will remain in the lowest-cost quartile.
We would like to grow in a wise way, so that when oil prices dip down again to USD 20-25, it will not hurt us so much that we could go bankrupt. That could have happened in the past, when our internal economics were based on prices of USD 80-100 per barrel.
We extract 6 million barrels annually from our fields and would like to do that for the next 25-30 years. We will focus on IUR [ideal ultimate result] and EUR [estimated ultimate result] options and field appraisals to ensure remaining at that production level. Everything we do should be based on that – producing 6 million barrels per year, our refining capacity, Suriname’s growth and gold investment – but keeping in mind low oil prices and the lowest-cost quartile.
We would like to step out and explore everything in the shallow offshore up to 35 metres and offshore drillable depths with a jackup rig at 75 metres. We will try to find partners to assist us with that, most likely in the development phase and not in the exploration phase. In April 2019, the first of 10 holes we drill will be 100% on our own. Based on what we find, we will drill the deeper parts at 30-75 metres. We don’t have to be the operator of the nearshore area because we don’t have that experience. That will give us natural growth, but we will only develop opportunities if they are in the lowest-cost quartile.

What is the status of the company’s E&P plans?
At this moment, all the tenders are out for the 10-hole programme, which is the first of many other programmes to follow. We are positive we will find oil and are ready for the moment we might have news that we have to go in to appraise and develop the field.
If we develop, we will look for oil company partners that are more experienced in developing oilfields with a jackup, not in the deep offshore. Potential partners could be Petronas, Kosmos or Tullow. It should be a sizable project and in the lowest-cost quartile. We only want to participate under these circumstances. We hope to attract the good EPC contractors and logistics companies of the world to assist us in making operations as smooth and efficient as possible.
We are preparing for a big oil find. What Kosmos doesn’t find, Apache will find next year or Tullow will in one and a half years. Staatsolie can participate with 10%, 15% or 20% depending on the PSC. If Kosmos makes a find now where it is drilling in Tambaredjo, it will put up a development scheme that will cost maybe USD 6 billion. If Staatsolie would like to develop a field with Kosmos and participate with 15%, we will have to put up USD 900 million.

What is your strategy for raising capital?
First, we would like to split our debt into bank debt with a consortium of banks that we have at the moment. Secondly, we would like to go for an international bond, which should be worth half the money we borrow.
International investors will start knowing about Staatsolie. The moment we have this big oil find in the lowest-cost quartile, we would like to participate with low-risk capital. We would go for an IPO, which should raise the money we would require for the development. Staatsolie should start preparing for that.
[In December 2017], we brought in EY as one of our big accountants to assist us in bringing our books up to IFR [international financial reporting] standards so we could go into capital markets. If we go for the bond, we will have it added late in 2018 or early in 2019, and then we will be ready for when the big oil find comes.

What position is Staatsolie in regarding refining capabilities?
The base crude that we take out of the ground can be used as fuel oil. Our base crude has 0.7% sulphur. We only have to blend a little to make it 0.5% sulphur. We predict that our crude will be sold almost at the price of diesel, but not for long, because the market will find a way to make 0.5% sulphur once refineries are updated.
In 2020-2023, we expect extremely high prices or our crude. We only have to blend it a little bit, so we will sell it as HFO [heavy fuel oil] for a very high premium. When the other refineries find a way to upgrade, we will lose many clients, but for the next few years, this will be a major windfall for Staatsolie.
Our refinery has a 9.6 on the Nelson [complexity] index. We have a high-pressure and high-temperature refinery. We are making petrol. We have a hydrocracker. We go up to 700 degrees Celsius and 150 bars.
We know what it is like to run a safety programme. You could not enter that premises without knowing what safety is about. We adopted that safety culture a while back. All of those that work with Staatsolie know they must have those standards to even come into the gate.

What is the outlook for the development of Suriname’s energy industry?
If you take away a big oil find that I believe will put us in an elite status, for the upcoming 30-40 years, we will still be able to extract 6 million barrels of oil from our own fields. I don’t think the energy demand will grow a lot more than it is today because efficiencies are being sought worldwide.
Also, Suriname will start using electric cars. We would love to invest in renewables projects. We should have something to work on, and then we will be a renewable energy producer. We still have a bright future ahead of us. The transition from an energy company to a renewable energy company will take some time.
I firmly believe the big oil find in the near offshore area will give us the sustainability as a country that we will need to feed the upcoming 10 or 15 generations with our growing wealth. We are currently the greenest country of the world. I would love for Suriname to remain that way.

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