"Lundin might make a bid for Talisman's Sudan properties at some point"
Sudan fire too hot for Talisman
Upstream, June 29
Dann Rogers
Hotspot: Talisman has been accused of inflaming Sudan's 19-year civil war, involving rebels of the Sudanese Peoples Liberation Army, and its deal with Lundin may leave the door open for the latter to acquire the Canadian indie's assets to add to its operatorship of block 5A, where it drilled the Thar Jath-1 find earlier this year.
Canadian independent Talisman Energy last week acquired properties in South-east Asia from Lundin Oil in an apparent attempt to position itself for an eventual exit from its politically costly investments in the prolific oilfields of southern Sudan.
Confirming an exclusive report in UpstreamOnline, Talisman agreed to pay C$529 million ($346 million) in cash to Lundin for its operations in Malaysia, Vietnam, Papua New Guinea and the UK North Sea.
In addition, Petro-Canada, which is still 18% owned by the Canadian government, agreed to pay $73 million for Lundin's interests in Libya - another oil-rich African country subject to US sanctions.
The third leg of the deal sees Lundin's assets in Sudan and Russia being spun off into a new company to be traded in Sweden and continuing under the current management.
Speculation that Talisman might be seeking a way out of Sudan came to a head last week after the US House of Representatives passed a Bill that would prohibit foreign companies from listing on American exchanges if they explored for oil in the African state.
That Bill still requires approval from the US Senate and President George W. Bush before it becomes law, which analysts doubt will happen.
However, they said the proposal would generate more negative publicity that would continue to depress Talisman's share price.
The company has faced a barrage of criticism from various human rights groups charging that its involvement in the Greater Nile Petroleum Operating Company (GNPOC) consortium has indirectly fuelled a 19-year civil war.
The joint venture is producing more than 225,000 barrels daily of low-cost, light oil and is said to be one of the main causes of the battle between the ruling Muslims in the North and a variety of Christian and indigenous groups scattered throughout the oil producing regions in the south.
The Canadian federal government said previously that it would not impose sanctions on Talisman for its role in Sudan, opting instead to recognise the company's efforts to improve conditions for people in the African state.
Talisman president Jim Buckee said he remains convinced the company's presence in Sudan helps the war-torn country more than having some other foreign oil player take over the Heglig oilfield - one of the fields under GNPOC's control - but that this corporate altruism would not be continued at the cost of losing access to the New York Stock Exchange where it is listed.
Talisman, Canada's biggest oil and gas producer, has also said it wants to have another core operating area to provide production growth before selling its Sudan assets.
To that end, analysts praised Talisman for gaining a toehold in Malaysia through the Lundin deal that will boost daily production by up to 60,000 barrels of oil equivalent by 2004. "The real issue for Talisman is getting into Malaysia," said analyst Martin Molyneaux of FirstEnergy Capital. "It has the potential for being the size Sudan is today."
Lundin's existing production in the North Sea and the potential in Malaysia could replace the Sudan production if Talisman decided to sell its African properties, which are valued at up to $980 million.
Lundin's Sudanese assets were not put up for sale in last week's deal, suggesting to some observers that the Swedish firm might make a bid for Talisman's Sudan properties at some point.
Buckee said he has not discussed that possibility with Lundin, adding that he didn't think the Swedish company had the resources to buy its 25% stake in the Sudanese project.
Another potential buyer is Malaysian state oil company Petronas, which is also one of the partners in the Sudan project.
"Petronas may have been a potential buyer of Talisman's Sudan assets before the Lundin deal, but it would have been for cash and they may have received less than what they value it at," said Brian Prokop, an analyst with Peters & Company. He added the deal gives Talisman the option to swap production volumes in Sudan for volumes Petronas has in South-east Asia.
Buckee said he liked the deal because of the opportunities to boost rapidly output in its growing Asian core area "The key strategic driver for us is the very large upside in Malaysia," he said. "This acquisition fits Talisman's strategy of acquiring assets in the late exploration stages, prior to significant production."
The Malaysian properties produce about 3000 boepd and Talisman expects to spend $229 million over the next four years to boost output to at least 50,000 boepd if exploration proves successful. |
