Talisman curses run of bad luck
Upstream, this week's issue
By Dann Rogers
Born 10 years ago following a reshuffling of BP's Canadian assets, Talisman Energy marketed itself to investors as a technically savvy, growing company with the expertise to discover large-scale reserves in international arenas and the willingness to take risks.
However, the toll of "greater political risk" on the bottom line became all too apparent last week when the Calgary-based company -- which apparently referred to itself as "a BP with balls" -- released second-quarter results that showed its output fell to an average 365,473 barrels of oil equivalent per day from 450,354 boepd in the same period last year.
This was due mostly to selling to India's ONGC Videsh its 25% stake in a lucrative producing oilfield in southern Sudan -- a dream project that became a nightmare.
Sudan had offered everything needed to generate the kind of growth that chief executive Jim Buckee had been promising and delivering in Talisman's first seven years.
The country was lightly explored and held massive reserves. Exploration and development costs were ridiculously low, the host government was open for oil business and there was no competition.
Talisman entered Sudan in 1998 through the back door, acquiring a Canadian minnow that had carried out exploratory drilling in the country but lacked the finances for a major project.
It received a 25% share in the Greater Nile Petroleum Operating Company (GNPOC) and its 12-million-acre concession, which held an estimated 10 billion barrels of oil, and where it was partnered by the state oil companies of China, Malaysia and Sudan.
However, the ethical risks involved in stepping into the Sudan play soon became apparent, as Talisman's presence became a symbol of Western economic imperialism. The outfit's participation in the project -- and the disclosure requirements of a New York Stock Exchange-listed company -- were seized by human rights activists as a focus for international condemnation of the country's 20-year civil war, which claimed an estimated 3 million lives.
The pressure on Talisman increased with a campaign pushing for the company to quit the country following allegations that the Sudanese government in the north had been using revenue from the oil project to fund its civil war against the rebel Sudan People's Liberation Army in the south.
Talisman constantly denied the allegations, claiming its involvement helped alleviate poverty and promote health and education in the country, and it was a point of record that it improved local water supplies, provided mobile health clinics and electricity, and set up successful agricultural projects.
However, the group always seemed to make matters worse for itself during this highly-charged public relations battle by restricting media access to Buckee and hoping its adopted mantra that "we are a force for good in Sudan" would suffice against its vocal detractors.
Following the asset sale in March, industry analysts said it was unlikely ONGC Videsh would be subjected to the same shame campaign over its international profile as was Talisman -- a point underlined by the reaction in India to the purchase, which was hailed as a focus of national pride.
"GNPOC is the best trophy we have on our table," said a senior ONGC director. "This acquisition has completely changed the image of our company as well as India overseas, particularly in Africa."
Another ONGC official added: "I often wonder why Talisman wanted and agreed to sell such a lucrative asset. No other company would have probably committed such a mistake."
One industry analyst said it was easy to understand the attitude of the Indian officials, who had more than their fair share of social ills to worry about without having to consider the plight of the oppressed Sudanese.
"Our lives are so good that we have special interest groups to talk about 'those poor people over there'. They were very effective in using Talisman to attract media attention to Sudan. But with Talisman out, Sudan is hardly in our news cycle now," he said. |
