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No fun in the sun for Canadian adventurers abroad Kidnappings, bombings, chaos overshadow the high-reward promise of high-risk investment, but companies say benefits are worth the dangers Gary Park PNA Canadian Contributing Writer
The price of “elephant-hunting” in faraway places has seldom taken a greater toll on Canadian oil and gas adventurers abroad than in the past few weeks.
They always talk candidly about the dangers associated with their global pursuit of huge oil pools. But being the victims of a hostage-taking in Ecuador, a pipeline bombing in Sudan and political infighting in Kazakhstan has all been a bit much to swallow.
The “no risk, no reward” mantra has some asking whether the rewards are sufficient to justify putting lives on the line.
Mike Ackerman, a former CIA agent and president of the Miami-based Ackerman Group, said he has bluntly told clients not to go into unstable areas unless they can afford the necessary protection.
“If you can’t protect your people properly, then you should pass it up,” he said.
Until now, except for the isolated scare, there has been a smug assumption among the 202 Canadian oil and gas companies operating in 124 countries that Canadians are generally more welcome than Americans and thus safer.
“The first thought through my mind is that Canadians are part of an international oil community and as such are not immune from acts of terrorism,” said analyst John Clarke of Deutsche Bank Securities in Toronto. Yet a strong sense of well-being persisted among the operators until September.
Kidnapping in Ecuador First, seven Edmonton-based contract pipeline employees working for Alberta Energy Co. were kidnapped by Colombian rebels operating in Ecuador. (As PNA went to press they were still in captivity.)
Just 10 days later, a pipeline blast in Sudan halted the flow of 150,000 barrels per day of crude oil to Red Sea tankers from Talisman Energy’s 25 percent owned Greater Nile Oil Project. Talisman quickly pinned the blame on Sudanese rebels who have threatened to make the 800-million-barrel project a target of their bloody civil war.
All the while, Calgary-based intermediate Hurricane Hydrocarbons has been struggling to sustain an 80,000-barrel-per-day project in the former Soviet republic of Kazakhstan.
AEC seemed stunned by its crisis in Ecuador’s Oriente Basin, which it acquired five months ago in a C$700 million hostile takeover of Calgary-based Pacalta Resources and was confident of turning into a 40,000-barrel-per-day producer.
“Our primary focus is in putting our energies and efforts towards assisting with the investigation and getting as much information to the (kidnap victims’) families,” said AEC spokesman Dick Wilson. “We’ll get back to the site when that’s all worked out.”
AEC also postponed a planned four-day tour of the properties by 20 analysts only one day after offering assurances that the visit would be safe. In fact, many analysts had already unpacked their bags.
Pipeline blast in Sudan Talisman took a harder line, insisting it would forge ahead with a November tour of its Sudanese operations for analysts and institutional investors, despite a pipeline explosion that temporarily stopped the flow of 136,000 barrels per day, but was rated by Talisman as a “minor incident.”
That was consistent with Talisman’s stance on the entire Sudanese venture, undeterred by U.S. bombings of suspected terrorist sites a year ago, rebel threats and church objections to Talisman partnering the Sudan regime.
Talisman president Jim Buckee has been adamant that involvement by Western companies will improve human rights in the region. “The right thing to do is for the oilfield to generate wealth and benefit all people,” he said.
Not everyone is so sanguine, especially not New York City comptroller Alan Hevesi, who heads a US$90 billion pension fund which owns 186,000 Talisman shares worth close to C$8.3 million.
He wrote Buckee in September saying he was “deeply troubled” by accusations from anti-Sudan lobbyists that Talisman’s involvement was helping finance the government’s war against rebels.
He said Talisman’s position “painfully brings to mind the intransigence of companies that operated in South Africa under apartheid,” and demanded Buckee answer the allegations. Buckee insisted Sudan was the victim of a propaganda campaign and rejected accusations of government-supported genocide and slavery.
It’s not expected to be the last time Talisman will be called upon to defend its Sudan investment. Red ink in Kazakhstan For Hurricane, the last year has been calamitous as its market capitalization has plunged to C$18 million from C$625 million, forcing it to seek shelter from creditors owed about C$290 million.
Its much-celebrated 80,000-barrel-per-day oil project in Kazakhstan — a venture that once included Hurricane ownership of a local soccer team and a sheep farm — found itself awash in red ink, largely because of infighting with its alleged refinery partner Shymkent.
A bewildering torrent of events has seen Hurricane first offer, then withdraw a plan to merge with Shymkent, after its bondholders ( including several US vulture funds) said the terms were unacceptable. (Its few remaining shareholders have so far been offered only a 3 percent stake in any rescue plan).
Hurricane, meanwhile, has been granted court-ordered protection from creditors while it works on a restructuring after hiring turnaround star Bernard Isautier, once CEO of Canadian Occidental, for what most analysts think is one last stab at survival.
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