Stung by criticism, Talisman considers withdrawing from Sudan
Another chapter in the saga of the Sudanese oil sector looked like it may be drawing to an unfortunate close, when, speaking before a Lehman Brothers gathering in early September, Jim Buckee, the CEO of Talisman Energy, hinted that the Canadian company was considering exiting the war-torn country.
"I'm aware our Sudan investment has been a drag on our stock, and we will move to fix that," Buckee told the participants at the meeting. Noting that there are ongoing attempts to bring about political reconciliation in Sudan, he expressed his company’s hope that they will be successful. But, he added: “If not, we'll have to evaluate our options.”
Calgary-based Talisman Energy is Canada's largest independent oil and gas producer. It is a 25 percent partner in Sudan’s Greater Nile Petroleum Operating Company (GNPOC), which controls the Greater Nile Oil Project. The project is located on 12.2 million acres of land in south-central Sudan, approximately 700 km southwest of Khartoum. Currently, it includes six producing oil fields, a 1,500-km underground pipeline and an offshore loading and storage facility in Port Sudan.
Other partners in the GNPOC consortium include CNPC, the national oil company of China, with a 40 percent share; Petronas, the national oil company of Malaysia, with a 30 percent share; and Sudapet, the national petroleum company of Sudan, with a 5 percent share. Under a Sudanization program, 60 percent of the positions at GNPOC have to be filled be Sudanese by 2001, and by 2006 a 90 percent rate is required.
The Greater Nile Oil Project has the potential to transform Sudan into a medium-sized oil producer. But it is located in one of the most unstable parts of the country and has proven to be an easy target for rebel groups, and in particular the Sudan People's Liberation Army (SPLA). When oil from the project first started flowing in June last year, the SPLA swore to stop it. On three occasions since then, they have blown up sections of the oil pipeline to Port Sudan.
But the security situation on the ground is only part of Talisman’s problem. Back home, the company has been targeted by human rights activists, protesting against the alleged ill treatment by the Khartoum government of Sudan’s southern population. The human rights groups have demanded that Talisman withdraws from Sudan, and that the Canadian government impose sanctions against the northeast African country. To date, Ottawa has been reluctant to act, but several months ago it sent a mission to investigate conditions in Sudan. The mission’s visit instigated a 15 percent fall in the value of the Talisman share price.
One country that has imposed sanctions is the United States, which has accused the Sudanese government of supporting terrorism. To comply with U.S. laws, Talisman was forced to lower a financial veil between its Sudanese operations and the rest of its business.
To appease its critics, Talisman devised a form of human-rights monitoring in the areas which it operates, recording violations and offering human-rights training to the government soldiers sent to protect the GNPOC oil installations. In May, its shareholders voted to adopt a set of principles for doing business in Sudan, which its authors had called the “International Code of Ethics for Canadian Business”, or the “Code” for short. The Code is meant to guide the company with respect to community participation and environmental protection, human rights, business conduct and employee rights, health and safety.
Talisman claimed that its involvement in Sudan will be a catalyst to economic development for the people of the region in which it is involved. In this respect, it built roads, wells, a 60-bed hospital and schools. And when 50,000 refugees arrived in the town of Bentiu, where it is located, it flew in emergency aid at its own expense.
But, apparently, Talisman’s efforts impressed neither the international community, nor the human rights groups, its partners in the GNPOC, and particularly the Sudanese government. The United Nations has avoided using the company’s airstrip in Bentiu. It has not been able to solicit the help of any NGOs in its development projects. It Chinese and Malaysian partners act bemused at its uncomfortable attempts to satisfy its critics at home. And, quoted in the Economist, Sudan’s energy and mining minister, Awad al-Jaz, said it was not Talisman's business "to talk about human rights", and then warned that Sudan does not need the Canadian company to extract oil.
If Talisman chooses to withdraw from Sudan, others most probably will be waiting in the aisles to take its place. Sudan’s oil minister, Mustafa Othman Ismail, has said that a number of foreign oil companies are interested in acquiring the Talisman share, including, possibly, two of Talisman’s partners in GNPOC, Malaysia’s Petronas and China’s CNFC.
In the meantime, Talisman appears to be keeping its options open. Indeed, an earlier statement by Buckee indicated that it was inclined to stay put. “We are convinced that our presence in Sudan is serving to speed the [political] process,” the Talisman CEO stated. “The Canadian voice and the principles of tolerance and equality that it expresses would be lost if Talisman divested from the project, yet the oil would continue to flow.”
On August 8, Al-Hayat reported that the Canadian company would be launching a series of new oil development and excavation projects in Sudan. Reportedly, the projects will increase the oil output from the Greater Nile Oil Project to 180,000 barrels per day, up from 157,000 barrels per day last year. The new projects include the digging of 15 new oil wells and the development of a further 11 existing wells.
Sudan began exporting crude oil on August 30, 1999, with its first shipment going to the Far East. Today, the country exports about 4.5 million barrels of oil a months, and it has been self-sufficient in oil since April 2000. – (Albawaba-MEBG)
© 2000 Mena Report (www.menareport.com)