Sudan: "Arguably, Talisman's departure could make the whole situation worse"
In Sudan, blood and oil do mix
Eric Reguly
The Globe & Mail, December 16
There is a saying in the Middle East that you can spill blood, but not oil.
Oil is sacred.
In the Middle East, there was an oil pipeline that meandered from Saudi
Arabia in the south to the Lebanese coast in the north, passing through
bits of Jordan, Israel and Syria on the way. Even though the Arabs and
Israelis were mortal enemies at the time, the oil always flowed, even
through the Six Day War in 1967. It was assumed that the pipeline's
owners protected their investment by ensuring that the military forces in
each country got a piece of the action.
Jim Buckee, the chief executive officer of Talisman Energy,is finding
that blood is easier spilled than oil in Sudan, as well. The Talisman wells
near Heglig, in southern Sudan, are pumping. They are connected to a
1,600-kilometre pipeline that runs northwest, past Khartoum, to Port
Sudan on the Red Sea. The oil wells and the pipeline are natural targets
for the Sudan People's Liberation Army (SPLA), the rebel force from
the largely Christian and animist south that wants to gain independence
from the Islamic government of the north.
Somewhere between one million and two million people have died in the
17-year civil war, one that has extraordinary parallels to the Biafran war
of the late 1960s. The Biafrans, mostly Christians and animists
themselves, sought independence from largely Muslim Nigeria. The
Nigerians had a big incentive to keep Biafra -- it had oil. The Nigerians
could no more imagine their country without oil-rich Biafra than the
northern Sudanese can imagine their country without oil-rich southern
Sudan.
It is therefore highly unlikely that the SPLA will be allowed to make the
oil fields or the pipeline an easy target; the Khartoum government
depends on them for hundreds of millions of U.S. dollars a year in
royalties. As the project, controlled by Greater Nile Petroleum
Operating Co., in which Talisman has a one-quarter stake, expands, the
royalty stream will expand with it.
Does this make Mr. Buckee one of Sudan's dogs of war? In a sense,
yes. Mr. Buckee, who visited The Globe and Mail this week with his "let
he with no sin cast the first stone" message, likes to think Khartoum is
not spending the oil revenue on weapons to obliterate the SPLA and its
sympathizers. How would he know for sure? Proving that the revenue is
being spent solely on health, agriculture and education would be
impossible.
Mr. Buckee says the government is not forcibly extracting people from
the region around the oil fields. This, too, strains credulity. Globe writer
Stephanie Nolen has just returned from two weeks in southern Sudan,
where she interviewed refugees who said they were driven from their
homes by government troops. They said their villages had been bombed
by government planes. She has gruesome pictures of wounded villagers.
You would assume that Talisman keeps track of what's going on around
the oil wells, where its exploration and development costs have reached
$735-million. In a high-risk region such as southern Sudan, failure to
have a superb intelligence-gathering system would be a breach of
fiduciary duty to Talisman shareholders. How is it that a single reporter's
observations differ so radically from Talisman's?
Talisman cannot argue convincingly that it is not enriching a regime that is
slaughtering its own civilians. Many shareholders have registered their
disgust by unloading Talisman. This helps to explain why the stock is
trading at a discount of about 25 per cent to its pre-Sudan level.
Talisman shares are superb value if, of course, you don't mind a little
blood mixed with your oil.
But Mr. Buckee does have a point. If Talisman leaves, the problem
doesn't magically disappear. The oil and the royalties don't stop flowing.
The civil war -- a war of no interest to anyone in Canada until Talisman
arrived on the scene -- won't end. Talisman would simply sell its stake in
the project to another oil company. The Chinese and Malaysians, who
are partners, may have no qualms about replacing Talisman (you wonder
whether the partners are not secretly delighted by all the negative
publicity; if Talisman is forced to sell, the price would drop). Arguably,
Talisman's departure could make the whole situation worse. With
Talisman gone, the Canadian government would lose what little
diplomatic clout it has in Khartoum.
There is no shortage of repressive regimes in the world. China, whose
government brought you the Tiananmen Square massacre, is considered
a friend of Canada. Ottawa does not discourage foreign investment in
China or Russia, which is slaughtering civilians in Chechnya. At any one
time, there are 20 or so civil wars in Africa.
Mr. Buckee does not want to leave Sudan. He believe the oil fields can
produce endless riches for Talisman shareholders, and he must believe
that the government will ensure the security of his investment. It would
just be nice if he admitted that the Sudan government's evil ways are not
entirely without benefit to Talisman. |
