Written by Marcel Chin-A-Lien on 29th May, 2025.
Disclaimer: my own musings, nonetheless, to whom it may interest and serve.
Please note that the accompanying image is AI generated.
- Guyana:
- Existing PSC (Stabroek Block):
- Guyana’s most prominent PSC, the 2016 agreement for the Stabroek Block (with ExxonMobil, Hess, and CNOOC), has often been criticized for being highly favorable to the international oil companies (IOCs).
- Royalty: A low 2% royalty.
- Profit Split: A 50% profit split after cost recovery.
- Taxes: Effectively no corporate income tax for the IOCs, as the government pays it on their behalf.
- Cost Recovery Cap: A 75% cost recovery ceiling.
- Benefits from the 2016 PSC: Despite the seemingly “lopsided” terms on paper, the sheer scale of discoveries in the Stabroek Block has led to:
- Rapid Development: A fast-tracked development pipeline with multiple projects in operation or under development.
- Massive Production: Guyana is rapidly increasing its oil production, reaching significant volumes and becoming a major global producer.
- Local Content:
- Guyana has implemented a Local Content Act (2021) to ensure more benefits accrue to Guyanese businesses and citizens, with annual benefits to locals exceeding US$500 million.
- Economic Growth: The oil boom has fueled unprecedented economic growth, with GDP soaring.
- Newer PSC Terms: Guyana has introduced new PSC terms for recent licensing rounds, which are generally considered more stringent and less investor-friendly than the 2016 Stabroek Block agreement. For example, new PSAs have a 10% royalty rate.
- Lower Break-Even Costs: Guyana generally benefits from lower break-even costs for its offshore projects (estimated between US27-US35 per barrel) compared to Suriname. This makes its projects more resilient to oil price fluctuations.
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- Suriname, “ Switi Sranan “
Suriname’s Position: -
- Existing PSCs: Suriname’s fiscal regime, exemplified by agreements for Block 58 (TotalEnergies, Apache, Petronas), generally appears more favorable to the state on paper than Guyana’s 2016 Stabroek Block deal.
- Royalty: A 6.25% royalty rate.
- Profit Split:
- A profit split according to an “R-Factor” formula, which allows Suriname’s share to increase with higher oil prices, while protecting the contractor at lower prices.
- Taxes: A stabilized corporate income tax rate of 36%.
- Staatsolie Participation: Staatsolie (the national oil company) has the option to participate in offshore developments, often taking a 20% stake, providing direct state equity. With corresponding substantial additional income for the country. This up to 20% farm-in option, only after a tangible and proven discovery, and before production, is solidly safeguarded in the Model PSC since 2010.
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- Current Development Stage:
- Suriname is at an earlier stage of offshore development compared to Guyana, with its first major offshore project (TotalEnergies’ GranMorgu) approved for production in 2028.
- Higher Break-Even Costs: Suriname’s break-even costs are estimated to be higher, ranging from US35-US45 per barrel.
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- Lack of Local Content Legislation:
- Unlike Guyana, Suriname currently lacks comprehensive local content legislation, which could be a factor in attracting or retaining investments focused on broader economic benefits.
- Unclear Gas Terms: For non-associated gas developments, the commercial structure and fiscal terms in Suriname are not yet fully clear, though there are reports of a 10-year tax break for such projects, such as for a possible FLNG development in Block 52 by Petronas.
Competitiveness Analysis and Need for Adaptation:
Do they stay competitive with their present PSC and fiscal terms clauses?-
- Guyana?
- 2016 PSC: The existing 2016 Stabroek Block PSC, while generous to IOCs, has undeniably attracted massive investment and rapid development due to the exceptional prospectivity of the basin. The sheer size of the discoveries has compensated for the less favorable terms from a national revenue perspective. This PSC, for the already discovered fields, remains highly competitive from an operator’s standpoint.
- Newer PSCs: Guyana’s new, more stringent PSC terms reflect a learning curve and a desire to capture a greater share of the oil wealth. These new terms aim to be more competitive in a global “Race to the Top” where countries are trying to secure more for themselves. However, the true test will be how attractive these new terms prove to be for future exploration and development in blocks outside the highly prolific Stabroek.
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- Suriname?
- Current PSCs: Suriname’s existing PSCs appear more balanced than Guyana’s initial Stabroek deal, offering the state a higher share upfront. This could be seen as competitive in the current environment of governments seeking greater returns.
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- Early Stage Advantage: Being earlier in its offshore boom, Suriname has the opportunity to learn from Guyana’s experience and adapt its terms to maximize benefits while still attracting investment. The ongoing political landscape and elections in Suriname are crucial for investor confidence.
Do they have to adapt to stay competitive and ahead?-
- Guyana?
- Yes, for future rounds and gas:
- Guyana has already begun to adapt with its new PSC terms. The continued focus should be on finding a balance that ensures a fair return for the nation while maintaining an attractive environment for further exploration in less de-risked areas.
- For gas developments, clear and competitive fiscal terms will be essential, as Wood Mackenzie highlights that “Guyana and Suriname need to provide clear commercial structure and fiscal terms for the projects to realize the countries’ LNG potential.”
- Fiscal Management & Governance:
- Beyond PSC terms, Guyana’s critical adaptation challenge is effective fiscal management of its oil wealth and strengthening governance and transparency.
- The IMF and other organizations emphasize the need for robust frameworks to avoid the “resource curse” and ensure sustainable, inclusive development.
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- Suriname?
- Yes, to accelerate development and broaden appeal:
- Suriname needs to maintain the momentum of its discoveries and convert them into production efficiently.
- Local Content:
- Implementing a comprehensive local content framework, similar to Guyana’s, could significantly enhance its attractiveness by demonstrating a commitment to broader economic development and local participation.
- Gas Terms Clarity:
- Establishing clear, competitive, and predictable fiscal terms for its significant gas discoveries will be crucial to attracting the necessary investments for LNG or other gas-to-energy projects.
- De-risking and Efficiency:
- Given the higher break-even costs, Suriname may need to emphasize efficiency and cost reduction initiatives to ensure its projects remain robust in varying oil price environments.
- The Global Petroleum Capital Investors Race Impact:
The global trend of investor-friendly reforms, as highlighted by many major financial and investor firms, creates a competitive dynamic. -
- For Guyana:
- As other countries offer improved terms, Guyana’s original 2016 PSC stands out as highly generous to IOCs. While it attracted initial investment, the government is rightly seeking more balanced terms for new projects.
- The challenge is to not swing too far in the other direction and deter future investment.
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- For Suriname:
- Suriname’s terms, while seemingly better than Guyana’s initial deal, are still competing in a market where many countries are actively refining their regimes.
- Suriname needs to ensure its terms are not just “better than old Guyana” but genuinely competitive on a global scale for new capital, especially considering its higher break-even costs.
In summary:
Both Suriname and Guyana are in a strong position due to their world-class discoveries. -
- However, the ” Global Petroleum Capital Investors Race “ means they cannot rest on their laurels.
- Guyana is adapting by introducing stricter terms for new contracts, and its main challenge is to manage its wealth wisely and avoid the resource curse.
- Suriname, while offering more favorable terms to the state initially, needs to clarify its gas terms, develop local content regulations, and ensure its overall investment climate (including progressive political stability, vision and transparency) remains attractive to accelerate its offshore development and truly compete effectively in the long run.
- The dynamic nature of global fiscal terms means continuous review and potential adaptation will be key for both nations to maximize their long-term benefits from their hydrocarbon resources.
About myself ?
Kind regards.
Marcel Chin-A-Lien
Petroleum and Energy Advisor
48 Years of Global, in-depth expertise, knowhow and insights.
That have generated transformative, multi billion giant fields discoveries, iconic first capitalistic new ventures in the USSR, bid rounds, added value and long term cash flow generating offshore exploration and production activities on Dutch North Sea, M&A, PSC designs, Contract negotiations.
Combined with a cross & trans discipline background of 4 petroleum post grad degrees, that fuse technical, business, commercial and management disciplines, accompanied by fluency in 7 languages in a variety of geographical, socio-cultural and business landscapes.
“ Exploration & Production integrated with Business & Commercial Development and Critical Insights “
Drs – Petroleum Geology
Engineering Geologist – Petroleum Geology
Executive MBA International Business – Petroleum – M&A
MSc International Management – Petroleum
Energy Negotiator Association of International Negotiators (AIEN)
Certified Petroleum Geologist # 5201 – American Association Petroleum Geologists – Gold standard Certification
Chartered European Geologist # 92 – European Federation of Geologists – Gold standard Certification
Cambridge Award “ 2000 Outstanding Scientists of the 20th Century ”, UK – Gold standard Award
Paris Awards “ Innovative New Business Projects “, GDF-Suez, France – Two Gold standard Awards, Paris, 2003.
Public Profile: nl.linkedin.com/pub/marcel-chin-a-lien/9/a73/547/
For Advisory Services contact:
Email: marcelchinalien@gmail.com