Staatsolie Maatschappij Suriname N.V: Uncovering one of South America’s largest untapped oil reserve
In a world that’s craving more and more energy, oil is often described as ‘liquid gold’.
But as depletion of the resource becomes an ever-closer reality, energy firms across the globe are scrambling for one thing: to strike the next big oil reserve.
It may seem like a one-in-a-million occurrence, but this bright future is in the close grasp of Staatsolie Maatschappij Suriname N.V.
“It's not a question of whether we will find oil offshore, it’s a question of when,” says Rudolf Elias, Managing Director and CEO. “Chances of success are greater than 50% and I don’t have any doubts – we are making ourselves ready for such an oil find.”
Staatsolie has seen roaring success in the past 37 years, producing over 109mn barrels of crude oil from the onshore Paleocene and Eocene reservoirs in Suriname.
Yet, offshore Suriname is virtually unexplored. Now, after finding a promising prospective oil reserve in the Guyana-Suriname Basin, the firm is preparing itself to hit big and, in doing so, it is set to become a major player in the oil industry.
The Guyana-Suriname Basin
Located off the north-eastern coast of South America and encompassing the coastal area of French Guiana, Suriname, Guyana and the eastern part of Venezuela, the prospective sedimentary basin is an exciting chapter in the company’s 37-year history.
The United States Geological Survey has ranked it second in the world for prospectivity amongst the world’s unexplored basins and 12th for oil among all the world’s basins explored and unexplored.
Offshore Guyana-Suriname might have one of the largest untapped oil reserves in South America. The region has all the markers of a next major oil province and it seems that Staatsolie is set to play a major part in this oil-rich future.
However, Staatsolie doesn’t underestimate the challenges that lie ahead and so it has established a thorough ‘strategy for success’ to assist it on this journey.
A thorough strategy for success
“Through our ‘strategy for success’, we want to become a partner of choice for international oil companies (IOC’s) that want to invest in the offshore business,” explains Elias.
The meticulous strategy outlines how the company aims to refocus its upstream activities. For instance, as a market that has been characterised by oil price volatility, Staatsolie is aiming to become a company that is driven by cost as well as production. To achieve this, the company is aiming to remain a first quartile oil producer, that is, a company producing within the lowest 25% of the cost curve. But how will Staatsolie achieve such cost-saving measures?
“It’s been a complete culture change,” explains Elias. “We divided the whole organisation into assets where everyone is responsible for their own production and costs. Then, based on that asset management principle, we put in an incentive system in place. That incentive system is not only based on cost and production; it also rewards individuals for their health, safety and environmental performance and that has been incredibly successful so far.”
This culture shift has meant that people are more responsible for their own actions and strive to truly uphold the company’s rich core values. By becoming a more people-focused company, Staatsolie has ensured that the right people are in the right roles at all times. At the end of the day, this has ensured that its workforce comes to work with a true sense of purpose and leaves with a sense of accomplishment.
What’s more, the integrated oil company has also optimised its downstream activities and overhauled its financial system through account audits. In doing so, the oil company hopes to prepare for partial privatisation through an initial public offering (IPO).
With over 26 years’ experience working for international names such as BHP Billiton, Elias has a wealth of industry knowhow. As a result, he recognises that to be successful, you need to have a concise, purposeful long-term vision.
“I think that we've gained a strong reputation in the industry because even though we are a national oil company (NOC) that does a lot for the community, we are still a purely commercial firm and think long term” observes Elias.
Staatsolie Vision 2030
This diligent planning is clearly evidenced by Staatsolie’s Vision 2030. Gearing up for a sustainable energy future for Suriname, the detailed plan outlines Staatsolie’s aims: to develop Suriname’s hydrocarbon potential over the full value chain, to generate electricity, and to develop renewable sustainable energy resources. It also sets out to establish a solid position in the regional market and to expand its reputation globally
Planning and preparation is a common thread which is interwoven throughout the company’s operations and, as a result, Staatsolie is diligently battening down the hatches to prepare for its next big oil find. Elias and his team are not spending huge amounts of capital or borrowing to prepare. Instead, they are strategically developing to become the partner of choice.
Although he is almost certain that oil will be found in the Guyana-Suriname basin, Elias is keen to maintain a realistic perspective. Therefore, Staastsolie is also working diligently to maintain the company’s current production rate.
“We produce over 6mn barrels of oil on an annual basis and we’d like to sustain this production level for at least 30 or 35 years,” says Elias. “The big question is, how can we extract more oil in an economical way in order to keep the momentum until 2050? That is the base strategy that we are following with our production department, our refinery, and our retail market – how can we sustain what we already have?”
This sense of pragmatism not only applies to Staatsolie’s production. It is also helping to redefine what the company’s key commodity could be in the future. Elias predicts that oil demand will peak between 2030 and 2040 before the volatile price will plummet. Thanks to the company’s cost-conscious approach, he is confident that Staatsolie will continue to thrive as a lowest cost quartile oil producer.
Exploring renewable energy
Yet, the future of the oil sector is a murky one and so Staatsolie is keen to tap into a new commodity – renewable energy.
“If you are in that low-cost quartile, you will be able to survive price volatility in the long term, but no matter how you see it, oil is an ending resource,” Elias says. “We should look beyond oil and what is it we are currently looking at? It's renewables. When we have excess cash in the coming years, we would like to take a percentage of our capital expenditure, say 5-10%, and invest that in renewables.”
However, this is more than just a case of buying the resources and shifting the company’s focus. This is a long-term transition and so Staatsolie will not just be investing in the resources, it will also be investing in its people to make it a reality.
“If I take an oil man, give him some solar panels and ask him to manage it, I will make a loss,” explains Elias. “This is because he is not prepared, he is not ready to manage renewables. We should invest in the renewables themselves, but we should also start preparing the minds of our people, especially our young people, to learn how to manage this new resource.”
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A local company with a global reputation
As a net exporter of oil, Suriname is an energy independent country, extracting about 120-130% of what the South American country needs. Staatsolie has made a name for itself in the region and this is no small part thanks to the company’s strong cultural values.
“One thing that Staatsolie has, that the IOC's and the big mining companies don't, is our rich set of core values,” Elias says. “Our workers trust in their own abilities, and they also hold the company in their heart. Over the past few years, there has been a cultural change at the company. It has become a more professional, business-like environment. Our team would do anything in order to make the company better and more profitable, but that family culture is something that you don't want to lose along the way.
“I firmly believe that the young people at Staatsolie will continue to carry on the vision we have at this moment,” he continues. “I believe they will run Staatsolie in the same enthusiastic way that they have been running their departments at the moment. I am very proud of the young people that work for us.”
With the exploration of the Guyana-Suriname Basin on the horizon and a meticulous strategy for success in the pipeline, Staatsolie’s work ethic is unquestionable. However, Staatsolie recognises that it cannot deliver these impressive objectives on its own. Highly praising the company’s strategic partnerships, Elias says that its close relationships with IOC’s have been integral to its success.
“Suriname has a long history of respecting the agreements with IOC's and this is perhaps one of our strongest assets,” he says. “It is also one of the reasons why we have been so successful in attracting all these IOC's. We are working with big names in the mining space such as ExxonMobil, Kosmos, Petronas, Tullow and Statoil. All of these companies are working closely with us in order to search for oil offshore and this is because of our history of being fair towards them.
“They are of great importance to us,” he continues. “They have the necessary technology and experience to do deep sea drilling. Without them, we wouldn’t be able to find oil.”
Transforming the region
With a proven petroleum system in place, a series of promising plays, and a significant amount of data, it seems Staatsolie is on a straight path to becoming one of the important names in the oil sector.
In doing so, Elias is confident that the big oil find will transform not only the future of the company, but it will also vastly help the people of Suriname.
“I think that we are slowly but surely making steps towards the Staatsolie Vision 2030. Our strategy for success is implemented and you can already feel the changes when you walk through the company. When people ask me, ‘Where do you see Staatsolie and the country of Suriname 20 years from today?’ I say it will be a completely different country. All the nation’s 500,000 people will be prosperous and will develop other ways of making money than oil alone. This big oil find will be a game changer for the government, for the business environment, and for the people of Suriname.”