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Oil, ethics, Sudan — the ingredients of a bad mix for Talisman Calgary-based independent gets tangled in civil war; now under fire from Canadian and U.S. governments Gary Park PNA Contributing Canadian Correspondent
If timing is everything, Talisman Energy must be wondering these days if it has anything.
The Calgary-based independent is suddenly encircled by critics — from church, human rights and refugee groups, to investors and now the Canadian and United States governments.
Created earlier this decade from the Canadian remnants of British Petroleum, Talisman has been propelled by C$4.4 billion in worldwide acquisitions since 1992 as it pursues top spot among Canada’s oil and gas producers by 2000.
But a large chunk of its aggressive growth strategy has involved operations in such human rights hot spots as Algeria, Indonesia and, above all, Sudan, where the ethical implications of such investment have snowballed.
Initially, the attacks were scornfully brushed off as misguided and misinformed by Talisman’s chief executive officer Jim Buckee, a British-born, Oxford-educated astrophysicist.
For long enough he seemed on safe ground, despite the Algerian government’s bloody campaign against internal dissidents and Indonesia’s brutal crackdown on East Timor.
Sudan a different story But Sudan has become a different story. In October 1998, Talisman acquired Calgary-based Arakis Energy, whose sole asset was a 25 percent stake in the Greater Nile Oil Project — on lands which once attracted Chevron and Royal Dutch/Shell.
The acquisition cost Talisman C$295 million and development costs have since pushed the company’s total investment to about C$730 million for a concession originally estimated to hold 450 million barrels of oil, since boosted to 800 million barrels, with full-cycle finding and development costs put at US$3 per barrel.
“It’s like the first steps into the North Sea,” proclaimed Buckee. “This is a world-scale, highly-visible project.”
Talisman’s partners are the state-owned oil companies of China 40 percent, Malaysia 30 percent and Sudan 5 percent — seemingly powerful allies in the midst of a 43-year civil war that has reportedly claimed 2 million lives and attracted allegations of genocide, slavery and enforced relocations on a mass scale by the Sudan regime.
Church critics of Sudan policies From the outset, Talisman was bombarded by churches, some of them company shareholders, who argued oil revenues would give Sudan’s rulers the funds to wage an even uglier war. They called for a divestment. Buckee responded that the fighting was mostly a tribal conflict involving 300 tribes “some as different as French and Chinese.”
Even as Buckee was wading into a public relations minefield, Canada’s Foreign Affairs Minister Lloyd Axworthy was getting an earful from the United States, which had declared Sudan a terrorist state, bombed Khartoum in 1998 and banned U.S. companies from doing business there.
In recent months the pressures on Talisman have intensified, first with a rebel pipeline bombing that briefly interrupted the flow of 136,000 barrels per day from the Greater Nile project, then with rising shareholder disenchantment, led by New York City’s US$90 billion pension fund, which holds 186,000 Talisman shares.
United States intervenes in October The crunch came in late October when U.S. Secretary of States Madeleine Albright announced she planned to talk to Canada about Talisman’s Sudanese activities. She said some companies had the mistaken view that foreign investment in nations run by dictators would improve the lives of ordinary people, when the revenues were more likely to be used to suppress those people.
Three days later, Axworthy took the unusual step of publicly expressing grave reservations about Talisman’s presence in Sudan. He “invited” Buckee to give assurances that those operations were not exacerbating the civil war and named a special envoy to seek independent answers to that question.
Depending on the outcome, Axworthy said he would consider economic and trade sanctions before Christmas that would make it difficult for a Canadian company to do business in Sudan.
The price of this high-risk play can be measured in Talisman’s stock market fortunes. Just after the 1998 U.S. bombings, the shares fell to C$23.10 from C$32.60; in the week after Axworthy’s announced his investigation they fell to C$38.85 from C$43.80.
But Buckee has emphatically rejected any prospect of Talisman withdrawing from Sudan, setting the stage for an unprecedented showdown between a Canadian company and its government.
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