News Article by THE ECONOMIST posted on August 31, 2000 at 17:47:54: EST (-5 GMT)
Sudan's oil - Fuelling a fire
THE ECONOMIST
September 2, 2000
KHARTOUM
WHEN Talisman bought a chunk of oil rights in Sudan two years ago,
Jim
Buckee, the Canadian company's chief executive, talked of its
"spectacular
potential". Spectacular it has been, but not always in ways that
pleased Mr
Buckee. The Heglig field lies across all the faultlines that have
caused
Sudan's civil war: political, religious and ethnic. Like Shell in
Nigeria,
Talisman has found itself in the middle of a war and under fire
from
activists back home.
The Greater Nile Oil Project, which is 25% owned by Talisman,
Canada's
largest independent oil- and gas-exploration firm, could transform
Sudan into
a medium-sized oil producer. But history suggests otherwise. The
very
discovery of oil contributed to the renewal of the war in 1983 and, when
oil
first started flowing in June last year, the rebel Sudan People's
Liberation
Army (SPLA) pledged to stop it. They blew up the oil pipeline to
Port Sudan
on the Red Sea three times.
Problems on the ground are matched by a row in Canada, where
human-rights
activists have demanded that Talisman withdraw and that Canada
impose
sanctions on Sudan, whose government, they say, has enslaved its
southern
peoples. America has already imposed sanctions on Sudan, accusing it
of
supporting terrorism.
Under pressure, the Canadian government sent a mission to
investigate
conditions in Sudan, and Talisman's shares promptly fell by 15%.
But the
company has fought back. To comply with American laws, it built a
financial
firewall between its Sudan operations and the rest of its business,
to ensure
that no American citizens were involved in its C$800m investment.
Then Mr
Buckee tried to head off criticism in Canada by arguing that oil
would
increase Sudan's wealth and help bring peace. He spoke of
Talisman's
"positive engagement", bringing "western values". Talisman even
signed the
International Code of Ethics for Canadian Business.
Implementing this has proved difficult. Sudan's war is nearly 50 years
old
and nasty. Since 1983 it has killed an estimated 2m people and displaced
a
further 4.5m. In the area just south of Talisman's Heglig field there are
at
least five armed bands roaming around, including the government forces
and
the SPLA rebels. Others are militia bands led by warlords who tend to
fight
for the highest bidder. Into this violent chaos Talisman is trying
to
introduce human-rights monitoring. It has designed a form for monitors
to
record violations in its area and it is even offering to give
human-rights
training to the government soldiers designated to protect the
oil
installations.
Talisman is also offering "development" in the form of water-wells,
roads,
schools and hospitals in its area. When some 50,000 displaced people
arrived
last month in Bentiu, the oil town where Talisman is based, it was
able to
fly in emergency help.
The company is also looking for partners for development, but all the NGOs
in
the area have so far turned up their noses. The other foreign partners in
the
Greater Nile consortium, the state oil companies of China and Malaysia,
are
reported to be wryly amused by their partner's earnest efforts to
observe
human rights. The UN will not even use the oil company's tarmac
airstrip at
Bentiu for fear of being compromised.
Nor is the Sudanese government particularly interested in
Talisman's
problems. It is resentful of the company's political activists.
Awad al-Jaz,
the oil minister, insists it is not Talisman's business "to talk
about human
rights", adding ominously that Sudan does not need Talisman to
extract oil.
Talisman claims to have convinced the government to set up a fund to
help
war-ravaged areas, an idea the government claims as its own. But, even
if the
fund is set up and oil money is used for it, there is still plenty to
spend
on weapons.
That is the crunch for Talisman. Sudan's government finances are obscure
but,
according to one minister, Sudan's top priority is to refurbish the
army.
Some of the estimated $300m the government will get from oil this year
is
already being spent on weapons. For all its concern for ethical
business,
human rights and development, the ugly truth is that Talisman is
helping the
government extract oil, and oil is paying for the war.