Oil and politics don't mix - Canada's Talisman feeling the heat in Sudan
Claudia Cattaneo
National Post, November 20
KHARTOUM - Deep in sub-Saharan Africa, due north of the White Nile
valley, Jim Buckee is surveying from the air one of his company's
oilfields in southern Sudan. The president of Calgary-based Talisman
Energy Inc. notes the tracks of seismic lines made some 25 years ago
by Chevron Corp., the U.S. oil company that spearheaded the hunt for
energy riches in the region.
The area around the Heglig oil facilities, located on a nomadic route
between the Nuba Mountains and the majestic river, is so desolate and
so dry, there's been no new vegetation to cover those lines, stretching
neatly side by side for dozens of miles.
If villages had been forcibly evacuated to make room for oil development,
as critics charge, wouldn't there be similar signs, wonders the executive,
an Oxford-educated astrophysicist who has built Talisman into one of the
world's largest independent oil and gas companies.
"There were no permanent villages here. To suggest we have the need to
move people is so farfetched," he tells a group of analysts he's brought
over from Bay Street, Wall Street and Calgary's investment boutiques as
part of a public relations offensive to counter growing opposition to
Talisman's role in the country.
Mr. Buckee says he is troubled by the deep gulf between western perceptions
of Sudan and his company's view of the development-starved country.
Talisman has been called a western apologist for the Sudanese government --
described as an extremist Islamic regime bent on ethnic cleansing.
And so, despite Talisman's stated goal of remaining neutral in the
crossfire, it has vehemently defended itself against charges they are
partners to slavery and slaughter.
Talisman paints Sudan as a friendly country shackled by a colonial
past, desperate to redefine itself as a democracy open to Western
investment. But just yesterday, an international aid worker who
travelled in the area last month said he saw thousands of Sudanese
civilians, living in putrid swamps south of Talisman's oil fields. The
worker said they had been driven from their homes by government
forces.
Oil was first discovered in Khartoum by Chevron in 1975, but
because of a civil war that has been raging for at least 16 years and
the large investment required to develop the remote oilfields, it didn't
begin to flow until this summer. Royalties and a share of production
have produced a revenue windfall welcomed by the government,
clearly supportive of Talisman's role.
"Oil did not make the Sudan. But it's going to be used to strengthen
agriculture," says Abdul Rahim Hamdi, chairman of a committee
struck by the government that is recommending the allocation of oil
revenues to promote economic development, rather than defense
spending.
The government benefits from the oil development to the tune of
$220-million (US) a year at current prices and production. Mr.
Hamdi says oil revenues will initially account for 20% of the new
budget. About 15% to 18% of government spending will be
allocated to defence, he said, pledging there will be no increases in
defense spending.
Gary Townsley, a facilities engineer, says he's seen no evidence of
the brutalities and the extremism reported in North American
newspapers. "I have lost a lot of faith in the press," laments Mr.
Townsley. "People are reporting things that haven't been verified."
He and his wife, Laurie Remi, an economist, feel so comfortable
that their two teenage daughters, Erin, 13, and Kayley, 12, recently
went on a camping trip to Sudan's spectacular pyramids, located
approximately 250 kilometres north of Khartoum, a few hundred
metres from the pipeline route.
Garry Kerkhoff, of Taber, Alta., who's been working on the site for
more than five years, also takes issue with Western reports. He says
stories of locals being forced out to make room for oil development
are outright false. "There was never any development here," he says.
"We generated a village here from nothing," adds safety supervisor
Ken Swensen, a former Arakis employee who's been here for three
years. They're among 150 to 200 Canadians who live and work in a
portable housing camp on the site. Nearby, there are villages of
straw and mud huts, housing some of an estimated 5,000 to 6,000
Sudanese who have migrated to the area to look for casual work.
Khartoum, punctuated by British colonial architecture, straddles the
junction of the Blue and the White Nile. Its population is a blend of
Arabs and Blacks, Muslims and Christians, refugees from the south
and businessmen from abroad. Strikingly beautiful women walk
about in modest but colourful costumes, their faces uncovered,
many with matching purses and high heels.
Analysts on Talisman's tour were surprised at the sparse military
presence in the city and key government buildings like the National
Assembly. They were amazed to see Catholic churches, given
reports the war is motivated by religious differences between the
Islamic north and the Christian south. "There is a lot of
misinformation out there," says Al Knowles, an analyst in Calgary
with Research Capital Corp., whose year-long research on
Talisman's situation in Sudan has included speaking to church and
human rights organizations. "Everything is hearsay and manipulated.
None of the European governments agree with the U.S.," he adds.
Still, Talisman is facing formidable opponents. They include the U.S.
government, which has criticized Canada for allowing Talisman to
continue commercial operations in the country and undermining its
own policy of isolating the regime.
The United Nations has also issued a report that criticizes oil
development in the region.
Groups like the United Church of Canada, World Vision Canada,
Freedom Quest International, and Eric Reeves, a U.S. English
professor at Smith College in Northhampton, Ma., have been
relentlessly critical.
"From every major humanitarian and human rights organization, we
get a composite picture that paints an overwhelming image of human
destruction and misery. But from Talisman, we get this benign
picture of, 'No problem. Peaceful friendly people, this is all
exaggerated.' That is a peculiar asymmetry, given the nature of the
evidence," says Mr. Reeves.
Talisman's security operations in the country consist mostly of
improving relations with locals. Its pipeline, in particular, is
vulnerable to attacks because it's so long, running a total of 1,500
kilometres, says Ralph Capeling, Talisman pipeline manager.
Through gestures like offering a new water well and offering jobs,
the company wants to demonstrate that the Sudanese can draw
tangible benefits from oil development, he says.
In one of its initiatives, Talisman funds an 80-bed hospital at the
Heglig oil site used mostly by Sudanese nomads and operates a
school for their children.
But good relations with the people and the government don't alter
one of Talisman's facts of life in the country: risk.
The project's pipeline was attacked by a Sudanese opposition
faction about a month ago, causing an explosion that took five days
to fix. The low-key incident showed minimal expertise, says Mark
Dingley, Talisman's British Army-trained security chief in the
country.
Most recently, some shots were fired at a drilling rig location south
of the Heglig oilfield and two Sudanese rig hands were injured.
Within a 24-hour period, a mine exploded in the vicinity, killing
military personnel guarding the area.
"Making it sound like organized combat is inaccurate," says Mr.
Dingley. The incidents typically involve perpetrators entering a
location in the dark and leaving quickly, he explains. "We are not
trying to say there are no difficulties in the south, a region with a
history of inter-factional conflict."
Talisman's PR efforts appear to have achieved a degree of success
with analysts. "I walk around here and I feel as safe as in many cities
in the U.S.," says Jackson Hockley, Chicago-based vice-president,
Scudder Kemper Investments Inc. "I thought they may hate
Americans," because of its hostile policies toward Sudan. "They are
happy, friendly, giving."
The controversy, which Mr. Buckee blames for knocking $10 off
the share price, has created buying opportunities, some say. Kevin
Nyysola, with Investors Group in Winnipeg, said he has been
buying on recent weakness and Talisman now accounts for almost
6.5% of a resource fund that he manages. "I'm not here to be
political, I'm here to make money for my unit holders. From an
earnings and cash flow point of view, the stock is relatively cheap."
By the final day of the five-day tour, most analysts were upbeat
about Talisman's project, but physically ill from the food, the water,
the heat. Temperatures averaged around 35C. A survival kit
provided by the company containing medicines to treat diarrhoea,
heart burn, nausea, and insect repellent proved a godsend. Many
were irritable from the anti-malarials they were required to take,
along with a cache of shots like yellow fever and hepatitis A and B.
There were no "situations" that ever posed security risks. The
closest the group came to an incident was during a tour of the
pyramids, when the Talisman bus got stuck on a sand dune covering
the project's pipeline. The Japanese bus spun its wheels for a while
and the analysts felt compelled to get out and push and lift
vigorously, anxious to help Talisman get back on the desert road.
Mr. Buckee, the president, seemed delighted. He was hoping the
glowing reports from analysts would give his company's stock a
similar push.
nationalpost.com
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