The small South American nation of Suriname plans to share revenues from newly discovered oil and gas fields off its coast.
Following several discoveries of oil reserves through the offshore drilling project known as Block 58 from 2019 to 2023, President Chan Santokhi unveiled an ambitious initiative called Royalties for All (RVI), aimed at ensuring that all Syrians benefit from the wealth generated for the country. The country, which experts estimate at about $10 billion over the next ten to twenty years.
“The RVI means that every Surinamese living in our country gets a savings note worth US$750 with an annual interest of 7 percent. The money will be paid in the future from royalty income in Block 58,” Santokhi said. Oil and gas production is scheduled to begin In 2028.
The royalties program is designed to distribute expected profits from the country’s natural resources directly to its citizens, representing a major shift in the country’s economic policy and potentially changing the lives of the Surinamese people.
How were the reserves discovered, and how would the royalty system work?
Where are the reserves found?
Block 58 is a major $10.5 billion deepwater oil and gas project located off the coast of Suriname, which became a Dutch colonial outpost after the British traded it to New Amsterdam (now Manhattan, New York) in 1667. Although it gained independence in 1975, Dutch remains the official language in Suriname.
French energy giant Total Energy, which operates in a joint venture with US energy company Apache Corporation (APA Corp), is the project operator at Block 58.
The project aims to take advantage of a large oil field located 150 kilometers (about 100 miles) off the coast of Suriname that has the capacity to produce up to 220,000 barrels of crude oil per day.
Is Suriname the only country that shares the oil wealth in this region with its citizens?
No, it is not the only country that has benefited from offshore oil exploration in the region.
Neighboring Guyana announced last month that hundreds of thousands of Guyanese citizens at home and abroad aged 18 or over would receive cash payments of about 100,000 Guyanese dollars ($480).
“Over the past week, thousands of Guyanese have reached out to me and members of my government, providing very positive feedback on the actions,” Irfaan Ali, Guyanese President, said in a statement in October.
How was oil discovered off the coasts of Guyana and Suriname?
Although much of Guyana and Suriname’s oil reserves were only discovered within the past 10 years, early onshore exploration in the 19th and 20th centuries found “oil seeps” — naturally occurring liquid or gaseous hydrocarbons — according to As reported by World Oil, a magazine focused on oil and gas. Gas exploration.
These early oil spill discoveries were understood to be evidence of larger oil reserves and efficient oil and gas systems beneath them.
In May 2015, ExxonMobil, a Texas-based multinational oil and gas company, and its partners made the first major oil discovery at the Lisa 1 oil well, located in the Stabroek area 193 kilometers (120 mi) off the coast of Guyana.
Although early oil exploration in Suriname began in the 1930s, the Suriname oil industry was not born until the first commercial oil discovery in the Calcutta field, located in the Saramaka region of northern Suriname in 1965 by Nederlandse Aardolie Maatschappij (NAM). It is a joint project. Between Shell and Exxon Mobil.
With the establishment of Staatsolie Maatschappij Suriname NV in 1980, Suriname significantly strengthened its control over its state oil resources. While modern exploration for oil and gas reserves began in the 2000s, TotalEnergies did not begin operations in Block 58 until 2019.
Will the newfound oil wealth change the economic prospects of Guyana and Suriname?
Oil wealth has not always translated into economic wealth for countries with large oil and gas reserves.
Santokhi told AFP he was “fully aware of the oil curse”, also known as the “Dutch disease”, which has afflicted resource-rich countries such as Venezuela, Angola and Algeria – none of which have seen a significant recovery. their economies despite their wealth of natural resources.
Only Norway has managed to escape the curse – mostly by building a sovereign wealth fund also known as a government pension fund to act as a buffer against the highs and lows of oil prices after one of the world’s largest oil fields was discovered off the Norwegian coast in 1969.
Suriname
Learning from this, Suriname set up a similar fund in anticipation of the influx of oil money, Santokhi said.
According to the 2022 Suriname Poverty and Equity Assessment, conducted by the Inter-American Development Bank (IDB) and the World Bank, the national poverty rate in Suriname is 17.5%. This is almost double the average of 9.2% of the world’s population (about 700 million people) currently living in extreme poverty.
Guyana
According to 2019 World Bank estimates, Guyana’s poverty rate is even more dire – at 48.4%, down from 60.9% in 2006, making it one of the poorest countries in the Caribbean and Latin America despite the oil boom there.
Although Guyana has one of the world’s highest per capita oil quotas, nearly half the population still lives on less than $5.50 a day, according to a 2021 USAID report, and has been hit hard by the global cost of living crisis. Recently. Years.
According to the report, “Political instability in Guyana raises concerns that the country is unprepared for its newfound wealth without a plan to manage the new revenues and distribute the financial benefits fairly.”
Although poverty remains a challenge, oil discoveries have reduced the poverty rate and opened the door to more government projects.
In September, the government outlined plans to build a $1.9 billion gas-to-power project aimed at doubling energy production.
Alex Graham, a Guyanese media analyst and businessman, told The Guardian: “If you haven’t lived through what we’ve lived through, you won’t understand what this amazing growth means.”
What other countries use the wealth of natural resources for the benefit of their citizens?
Mongolia
In 2008, Mongolia established the Human Development Fund, which is responsible for distributing mining revenues to citizens through cash payments. The program is also designed to use revenues from state-owned coal and copper mining companies such as Erdenes Tavan Tolgoi and Erdenet Corp to fund social programmes, infrastructure projects and healthcare.
According to a 2012 article from the Brookings Institution, a nonpartisan policy think tank based in Washington, D.C., the Mongolian parliament in 2011 authorized the allocation of 805 billion tugrik (about $567 million) from the fund to all citizens. The aim of this allocation was to cover the costs of health insurance and tuition fees for students. In addition, a cash sum of 21,000 Tugrik (about $15) was paid to each citizen.
After the 2012 elections, the government implemented austerity measures to address Mongolia’s dire economic situation. She stopped paying cash and returned to a more targeted approach, focusing solely on the children’s monthly payments.
Due to structural inefficiencies in the Human Development Fund, it was eventually replaced in 2016 by the Financial Stabilization Fund, which focuses on stabilizing the economy rather than distributing direct monetary benefits.
Botswana
Botswana’s sovereign wealth fund, the Pula Fund, was established in 1993 to manage proceeds from diamond exports. The Fund underwent major restructuring in 1997 under the Bank of Botswana Act 1996.
The Pula Fund does not make direct payments to citizens. Its primary purpose is to protect the economy from cyclical financial shocks.
According to 2023 estimates from GlobalData, a data analysis and consulting firm, Botswana is the world’s second-largest diamond producer and accounts for about 20 percent of global diamond production. But in 2023, Botswana exported $3.2 billion worth of diamonds, a 31 percent decline from 2022 exports.
After independence in 1966, Botswana was the second poorest country in the world, but according to recent World Bank economic reports, it is now considered an upper middle-income country with most of its growth based on diamond exports.
US
In the United States, some states rely heavily on oil and gas revenues, and some states have found ways to directly benefit citizens.
Alaska
The Alaska Permanent Dividend Fund was created by a constitutional amendment shortly after oil production began in 1977 in the state’s oil reserve – the largest reserve ever in North America. The Prudhoe Bay oil field is located in the North Slope region.
The fund was created to use proceeds from oil production to pay dividends to “current and future generations of Alaskans.” Nearly 600,000 Alaskans are eligible for $1,702 in dividends this year, according to state officials.
Alabama
In Alabama, 28 percent of revenues generated from the sale of oil and gas are transferred to the Alabama Capital Improvement Trust Fund. This government fund primarily finances the costs of technology and infrastructure projects that include building and renovating roads, bridges and government buildings, all of which provide an influx of jobs for the state.
Montana
In 1976, the Montana Coal Severance Tax Trust Fund was created through a voter-approved constitutional amendment. Half of it is funded by taxes on coal mining revenues. The fund is responsible for job creation, school facility projects, new infrastructure and renewable energy projects.
