Talisman working on a Sudanese exit strategy
Globe and Mail, June 23
By MATHEW INGRAM
The attempt by members of the U.S. government to pressure Talisman Energy into selling its Sudan operations seems to be having some effect, even though the bill they proposed is not law. Talisman said Thursday it is buying Swedish firm Lundin Oil, but the Sudanese assets Lundin holds are not included — they will be spun off into a subsidiary company that will continue to be controlled by the Lundin family. Just because the pressure from the U.S. seems to be working, however, still doesn't make it right.
The main attraction of the deal with Lundin seems to be that Talisman gets additional foreign exposure, in Malaysia and Vietnam, which could help ease the pain if its Sudan operations eventually have to be sold. "One of the things that we have always said is that having a new area of entry [such as Malaysia] is one of the necessary preconditions" to selling out of Sudan, Talisman CEO Jim Buckee said in a conference call.
The Lundin family are also natural buyers for some or all of Talisman's play in Sudan, if the bill that recently passed in the U.S. House of Representatives is approved by the Senate and becomes law. Mr. Buckee said on the conference call Thursday that the Calgary company didn't buy the Sudanese assets that will be spun off because "they weren't on offer." In other words, the Lundins wanted to hang onto them, perhaps because they see an opportunity to acquire Talisman's Sudan assets at some point.
The Stockholm- and Geneva-based Lundin family is not averse to investing in troubled parts of the world, in their quest for gold, copper, oil and various other resources — in fact, they seem to deliberately focus on countries such as Zaire, Colombia and Peru. The investors who favour companies run by patriarch Adolph Lundin and his two sons Lukas and Ian don't seem to mind that they are often involved in countries that are controlled by hostile, sometimes politically questionable governments. Having a larger interest in Sudan likely wouldn't trouble them in the least.
Talisman, however, has been hamstrung by its investment in the war-torn African country for the past several years. Not only has it faced a barrage of criticism from various human-rights groups — including demonstrations at annual meetings, letter-writing campaigns and so on — but the share price has also suffered as some pension funds have sold their investment in the company, and other investors have probably avoided making one). Some analysts say Talisman is a tempting takeover target for a major foreign firm in part because of the "Sudan discount" its stock carries.
Now, the House of Representatives has passed a bill that could prevent any company with operations in Sudan from raising money through the New York Stock Exchange (where Talisman is listed). Mr. Buckee has said he is convinced the company's presence in Sudan helps the conflict-plagued country more than having some other foreign oil player take over the Heglig oil field — but he has also said that keeping the investment would not be worth losing access to the New York exchange. In other words, if the law gets through the Senate and President George W. Bush, Talisman would sell.
The well-intentioned attempts by various U.S. congressmen and religious leaders to pressure Talisman into selling its operations seem to miss the point entirely. Talisman is not the problem in Sudan — an Islamic military regime and generations of North-South tribal warfare are the problem. Convincing Talisman to sell its assets to the Lundin family or the Chinese national oil company or the Malaysian national oil company (both partners of Talisman's in Sudan) and exit the country would do nothing to solve the problems in Sudan. If anything, it could wind up making them worse.
The only reason that Sudan and its 50-year-old, on-again and off-again civil war are as front and centre in the United States as they are is because Talisman, a company that happens to be listed in the United States, is involved. What if it wasn't any more? The U.S. could continue its campaign of working with rebel "leader" John Garang (and ignoring any other competing rebel groups) and keep its trade sanctions, for whatever good they do (not much). And Sudan would continue doing whatever it wished, pumping as much oil as possible with the help of the Chinese and Malaysians.
That hardly sounds like something to cheer about.
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