Fosters Unit Wins Sudan Concession: Junior's Site Double The Size Of Nearby Talisman Field
Financial Post, March 13
By CLAUDIA CATTANEO
CALGARY - Fosters Resources Ltd., a fledgling Canadian junior oil company, said yesterday its affiliate Melut Petroleum Co. Ltd. has acquired a concession to develop a new oil project in war-torn Sudan.
Melut will spend $30-million (US) on exploring the concession in the Melut Basin in central Sudan over the next three years.
Fosters has a 25% interest in Melut and agreements to increase its ownership to 83%.
Randy Pawliw, Fosters' president, said on Friday the company was negotiating the deal with Sudapet, the state oil company, and partner Gulf Petroleum Sudan Ltd.
The firm would be Canada's second oil and gas producer to operate in the country, whose Islamist government has been under attack by the U.S. government and human-rights organizations for using oil revenue to fund a civil war against rebels.
The 72,000-square-kilometre, mostly unexplored concession is east of Talisman Energy Inc.'s and about twice as large.
"There's possibilities of establishing pools of the size of Talisman's in our exploration efforts," said Mr. Pawliw, who was founder and president of Cimarron Petroleum Ltd., an energy company with a market capitalization of about $400-million when it was sold to Newport Petroleum Corp. in 1997.
"There's room for many surprises. It's too early to establish a reserve number," he said.
Talisman, Canada's largest independent oil company, is a 25% partner in an oil and pipeline project in the country that produces about 160,000 barrels a day. The company has been heavily criticized for operating in Sudan, but wants to stay in the country because it is believed to hold world-scale oil pools.
Mr. Pawliw said he's "certainly concerned" about his company being criticized like Talisman.
"My job is to enhance shareholder value, but we can do that in an honest, ethical way and at the same time be a good citizen.
"I have visited with church groups and toured the Talisman project. I have seen people ... come to the medical facilities (funded by Talisman). I have seen the rigs completely staffed with Africans. Three hundred years of status quo has not solved the problem. I have met with the (Sudanese government) ministers and in my estimation ... they truly want peace. And I believe that our presence will do more good for the country, than us not being there."
Lloyd Axworthy, the Foreign Affairs Minister, threatened sanctions against Sudan last fall. He backed off last month, even though a special investigation found oil development is aiding the civil war. The U.S. Treasury, on the other hand, has imposed sanctions on the consortium operating the Sudan project, in which Talisman owns 25%.
Mr. Pawliw said he's not working with Talisman at this time, but hopes to co-operate in the future.
He said negotiations with the Sudanese started a year ago, when oil prices slumped to $12 (US) a barrel and before the barrage of bad publicity against Talisman.
The talks were headed on its behalf by John McLeod, the former president and chief executive of Arakis Energy Corp., whose purchase introduced Talisman to Sudan almost two years ago.
"Certainly, Mr. McLeod's expertise in the area ... was instrumental in us being able to negotiate this," Mr. Pawliw said.
Fosters, a former dormant mining shell company, has no other projects, other than a gold claim in New Brunswick.
Mr. Pawliw said the Sudan venture is backed by a number of shareholders that were previous Cimarron shareholders.
The concession will be held in the name of a company named Melut Petroleum Co. Ltd., a company based in Barbados.
Sudapet would have an 8% stake in the project, while Fosters would be an equal partner of the remainder with Gulf Sudan, an oil company that is not related to Gulf Canada Resources Ltd.
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