President of Suriname Chandrikapersad Santokhi (File photo)

Suriname president warns against lavish spending after a third oil discovery

President of Suriname Chandrikapersad Santokhi (File photo)

President of Suriname Chandrikapersad Santokhi has warned against lavish spending in the future as oil companies here predict that the Dutch-speaking Caribbean Community (Caricom) country could receive an estimated US$50 billion in revenue from three major oil finds over the next two decades.

“Good governance and good regulations are also necessary, and an important part of the money has to be placed in a savings and stability fund. We also have to think about future generations,” Santokhi told reporters.

On Sunday, oil company officials announced a third oil discovery along the coast of Suriname and, according to the State-owned Staatsolie and the oil companies Apache and the French Total, that the prospects are very good.

President Chandrikapersad Santokhi (centre) flanked by Staatsolie acting director Agnes Moensi-Sokowikromo and Ian Roberts of Apache Oil company. (Photo: DTW Online)

Santokhi warned that the expected revenue would not make the country rich and prosperous, and that there will certainly be no wealth if the other sectors of the economy are not able to benefit.

The oil companies said that the US$50 billion could, with more finds, increase significantly, noting that the current calculation is based on figures that apply to the first Lisa oil well found in Guyana.

The international market value of the American oil company Apache, which operates in Suriname, and which, together with Total, has a fifty-fifty share in the Suriname oil concession, has risen sharply with the recent oil discovery.

Signage for energy company Total SA (Photo: Reuters)

“Congratulations, Suriname! You really stepped over the edge here into true world discovery,” said Ian Roberts of the Apache oil company told reporters.

He said that the quality of the third find made last week is so good that the product hardly needs to be processed. That is why production can start much earlier than expected.

Staatsolie acting director Agnes Moensi-Sokowikromo said that the company has used its 40-year experience in the sector to ensure success with the new finds.

Agnes Moensi-Sokowikromo, acting director of Suriname’s Staatsolie Maatschappij. (Photo: Staatsolie)

“Suriname has poor creditworthiness internationally, making it difficult to do business on the international capital market. Investors have high demands. For example, if Staatsolie wants to participate in the investments in ultimate oil production, it will initially have to pay US$1.5 billion.

“The best way to get that money is through the international capital market,” Moensi said.

President Santokhi said he is aware of the problem, noting that shortly before the new coalition Government came to office last month, Suriname was labelled bankrupt by almost all credit-rating agencies and that it could not pay its debts.

In July, US-based Fitch Ratingsdowngraded Suriname’s long-term foreign-currency (FC) issuer default rating (IDR) from ‘C’ to ‘RD’ (Photo: Business Wire)

But he said that the new Government is creating new confidence in Suriname and that the very negative status was slightly improved by the credit-rating agencies almost immediately after the Government was installed.

He said that with assistance from various international agencies, including the International Monetary Fund (IMF), he is confident of improving the status significantly.

The International Monetary Fund in Washington, DC, USA. Suriname President Chandrikapersad Santokhi believes that with the help of the IMF, the country can reverse its current credit status. (File photo)

President Santokhi said that the Savings and Stabilization Fund Act, which was passed by the previous Parliament in 2017, but was never made operational, will enter into force soon.

“It is a challenge for us, but we are going to make the fund operational. This law specifies exactly how the calculation formula is and what percentages of the State will return from the natural resources to the fund,” Santokhi said, giving a guarantee that his Government’s policy will be to apply this law to all-natural resource revenues.

Noble’s Sam Croft sails offshore Suriname, in the Block 58 basin. (File photo)

He said the Savings and Stabilization Fund is necessary and important for diversifying the economy and sustainable development of the country’s future. In addition to diversification, Santokhi also believes that some of the funds should be used to further develop the various sections of the society. through investments in education with a knowledge society, the country’s infrastructure and information technology.

The Savings and Stability Fund Act was passed unanimously by the National Assembly in May 2017 with the aim of not only earning and spending what is earned from the manufacturing sectors, but saving and diversifying the economy. The fund was supposed to be operational in 2018, as promised by the then Desi Bouterse Government.

Former Finance Minister Gillmore Hoivelraad had said then that in five years the fund would have in excess of US$200 million.