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LUNDIN: WILLFULLY BLIND TO DEVASTATION IN BLOCK 5A

Lundin’s Concession

Lundin Sudan Limited is the Swedish company which was the operator of the consortium granted the rights to develop Block 5A, largely located south of Bentiu in the swampy, marshy, and meandering flat landscape on the West Bank of the White Nile in Western Upper Nile/Unity State. Most of the inhabitants of Block 5A are Nuer, except for some Dinka in the northern and southwestern corners that are not presently the targets of oil development.

The consortium consisted of Lundin Petroleum AB (Sweden), OMV (Sudan)Exploration gmbH (Austria), Petronas Carigali SDN BHD (Malaysia), and Sudapet (Sudan): Lundin had 40.375 percent, OMV 26.125 percent, and Petronas 28.5 percent. Sudapet owns 5 percent.¹³²³ The concession was granted in 1996, operations on the ground started in late 1997, and within months fighting broke out in the key Nuer towns of the block, culminating in a May 1999 attack on the first well Lundin drilled. The attack was carried out by Riek Machar’s SSDF forces, who executed three government employees there. Lundin evacuated the one hundred workers at the site the same day and did not recommence oil operations for eighteen months, until late 2000, after the government and its militia had attacked, burned out, and displaced many thousands of Nuer living there.

In March 2001, Lundin announced a “significant find” at the Ryer/Thar Jath location. In the same month, the NGO Christian Aid issued a report critical of Lundin for its role in Sudan. In January 2002, after one of its helicopters was shot down, Lundin again suspended operations on Block 5A. A major government operation, primarily against civilians along the oil road, began in early 2002, resulting in more massive displacement and civilian casualties. Operations on Block 5A were suspended for fourteen months, until April 2003, while the government pursued an offensive in Block 5A, in violation of the ceasefire agreement. Only a few months after the resumption of oil exploration activity, Lundin agreed to sell out its interest in Block 5A to its partner, Petronas.

Lundin Hides the Situation of Armed Conflict in Block 5A

Waves of massive displacement have been destroying life for the residents of Lundin’s Block 5A concession since it started operations in late 1997—though developments in peace negotiations in late 2002 did provide some hope that the pattern might cease.¹³²⁴ The forcible displacement of Nuer agro-pastoralists from their homes, and from the Jagei area they believe is the place of origin of all Nuer,¹³²⁵ began once Block 5A’s economic feasibility was created by the construction of the GNPOC pipeline to the Red Sea. As described above, the pipeline was designed with excess capacity so that it could carry the GNPOC oil as well as several hundred thousand more barrels of oil daily from Block 5A and other nearby blocks to the marine terminal.

The oil companies, led by Lundin, made no public statement condemning this destruction and displacement in Block 5A, despite the press attention it garnered and the regular alarms from U.N. agencies about the dire state of the needy in this very area.

Nor did the oil companies disclose that rebel attacks had closed down their activities in May 1999. As set forth above, Lundin’s only exploratory well was attacked by rebel forces and the work force of approximately one hundred was evacuated the same day, by air, on May 2, 1999. The same day, as part of that attack, three government employees at the rig were shot point-blank by rebels; two died immediately and a third died of his wounds hours later; these killings were summary executions.¹³²⁶ Lundin’s operations were suspended in May 1999 until late 2000 because of this attack on its operations and continued fighting, burning, and looting—with civilian casualties—between Nuer forces backed by the government, and later between Nuer forces backed by the government and by the SPLA.

Nor did the oil companies, led by Lundin, disclose the fighting that occurred up and down their block, Block 5A, during the months of June, July, and August 1999. Although their operations were suspended, they could not have failed to monitor the situation through the project security staff, because this was a valuable property where they expected to produce substantial quantities of quality oil.

The World Food Program noticed, however. It put out an alarmed press release on July 10, 1999, stating it feared “a worsening humanitarian crisis as it is unable to deliver urgent relief assistance to tens of thousands of people trapped by the fighting.”¹³²⁷ It estimated that war between two rebel factions was blocking food delivery to 150,000 in rebel-held areas of Western Upper Nile/Unity State.¹³²⁸

None of this fighting nor mass displacement caused the oil consortium, led by Lundin, to express concern about the well-being of the people living in its concession area.

Lundin never mentioned the armed conflict in its public releases.¹³²⁹ Instead, it announced in January 2000 that:

Sudan operations related to the re-entry of the Thar Jath well drilled in May 1999 have commenced. The testing of the Thar Jath well is scheduled to be completed by mid-February 2000 followed by at least one further exploration well.¹³³⁰

Only a month later, however, Lundin Oil announced that it had “temporarily suspended testing operations on the Thar Jath #1 well on Block 5A . . . due to logistical considerations.”¹³³¹ According to the press release issued on February 20, 2000, “The access road running from the company’s supply base at Rubkona to the rig site with an approximate length of 100 kilometres, is still under construction.”¹³³²

Still no word about the fighting and displacement. The press release added that Lundin expected to resume testing operations in approximately one month, “once all the necessary equipment has reached the well location.”¹³³³ In its report for the year ended December 31, 1999 (issued on February 28, 2000), Lundin began to edge away from that estimate for early resumption of operations:

In Sudan the amount of work that can be carried out will very much depend upon the length of the dry season and our ability to overcome the logistical challenges. Sudan remains a tremendous opportunity for the Company and the Thar Jath discovery alone, which was drilled last year, could materially affect the Company’s reserves profile.¹³³⁴

In March 2000, Lundin announced that its activity on Block 5A remained suspended because of “logistical difficulties and safety considerations,”¹³³⁵ for the first time hinting at but not admitting the armed conflict in which Block 5A had been enmeshed since 1999 at least. In its report for the third quarter of 2000, issued on November 14, 2000, Lundin noted, “In Sudan the construction of the all-weather road on Block 5A is progressing well . . . .”¹³³⁶

Lundin did not disclose that there were ambushes on convoys traveling on the road to its drilling site, nor ambushes on its road construction/improvement activities in 2000, and that there was extensive fighting again in Block 5A during the months of June, July, and August 2000, up to September 2000. There was a large swathe of burned territory stretching all the way from Nimne to Nhialdiu, south and east-west of Bentiu, by late July 2000. The vast area of burn and destruction was visible from any small plane—a relief plane flew over the area and commented on the destruction in late July 2000, which cut through the area of the oil road.¹³³⁷

Thousands of displaced persons from this area of Block 5A fled into Bentiu for relief in the month of August 2000, generating relief agency alarms and press and coverage.¹³³⁸ Thousands more headed from Nhialdiu through Bul Nuer territory and into Bahr El Ghazal for relief. Still there was no oil company comment on this large-scale tragedy unfolding in its concession.

Lundin sent a letter to Human Rights Watch in September 2000, shortly after these events, answering Human Rights Watch’s inquiry about allegations of civilian displacement and the May 1999 attack on the rig. In its reply Lundin stated:

Lundin Oil activities in Sudan are still at the exploratory stage; we have therefore a limited presence and impact there. It is therefore difficult for us to fully refute or confirm what you claim to be undisputed facts, even though we do not agree that oil is the cause of the conflict or that massive population displacement has taken place on Block 5A.¹³³⁹

Lundin did not even admit that rebels attacked its rig in May 1999 and it suspended operations. Its operations were still suspended at the time of its letter. It did eventually admit its operations were suspended for eighteen months—but not until February 2001, when it published its 2000 annual report and had already recommenced operations.¹³⁴⁰

Lundin was finally able to start its operations again in December 2000, and announced that it had commenced testing operations on the Thar Jath-1 well (which locals called Ryer) within a few days of the inauguration of the seventy-five kilometer all-weather road from the base camp at Rubkona to the drilling location. It expected the testing to last about four weeks.¹³⁴¹

On March 5, 2001, Lundin Oil put announced in a press release entitled, “Lundin Strikes Oil in Sudan,” that its drilling at the Thar Jath-1 well (Ryer) resulted in “a significant oil discovery on Block 5A.”¹³⁴²

In its year-end 2000 report, Lundin retrospectively admitted, “operations on the Thar Jath well in Block 5A resumed in late December [2000] . . . . after an 18 month suspension . . . .”¹³⁴³ During the time of its “suspension” a seventy-five kilometer road was constructed which, together with a bridge over the Bahr El Ghazal River at Bentiu, would provide year round access into Block 5A¹³⁴⁴—at the cost of the massive displacement described in this report. More than any other construction, the bridge spelled trouble for the residents and displaced persons south of the river. It opened up the area to “year round access” and attacks by Baggara horsemen and increasing numbers of army vehicles.

Lundin Denies Revelations about Forced Displacement in Block 5A, 2001

In mid-March 2001, Christian Aid, a London-based charity funding relief, education, health, and community-building activities in southern Sudan, issued a report, The Scorched Earth: Oil and war in Sudan.¹³⁴⁵ It reported, based on interviews with victims, that government troops and militias had burned and depopulated the entire length of Lundin’s oil road in 2000 in order to make way for Lundin’s operations.¹³⁴⁶

Christian Aid called on a Lundin board member, former Swedish Conservative Party Prime Minister Carl Bildt (1991-94), to resign as U.N. Special Envoy to the Balkans. It said that his position as a U.N. peacemaker was incompatible with his membership on the board of Lundin Oil because of Lundin’s operations with the Sudanese government and Sudan’s scorched earth strategy around oilfields.¹³⁴⁷

The Swedish foreign minister Anna Lindh said, “Lundin Oil activities are negative for Sweden,” according to one press report. She added, “we expect Swedish companies to respect an ethical code in line with human rights and the environment in which they operate abroad.”¹³⁴⁸ A special on Swedish television the week of the release of the Christian Aid report featured Mr. Bildt lead to an avalanche of warring press releases in Sweden, as Mr. Bildt refused to resign from the Lundin board or his U.N. peace position, and mounted an attack on his critics in the press. Lundin scheduled a special board meeting in late March to discuss the allegations.¹³⁴⁹

Swedish Foreign Minister Lindh sought to have the Swedish government investigate Lundin’s activities in Sudan. Lundin said it welcomed the inquiry.¹³⁵⁰ Handelsbankens Fonder, the fund division of a Swedish Bank (Handelsbanken), a large shareholder of Lundin, sold its stake in Lundin Oil. A number of other large investors in Lundin demanded an explanation regarding the human rights criticism of Lundin’s presence in Sudan.¹³⁵¹

Lundin responded to the Christian Aid report with an expression of concern, saying “the company has not witnessed the acts alleged and would not accept violations of human rights within its sphere of operations.” It said it would monitor the situation and look further into the allegations. It stated that its environmental impact study contained information indicating low density population settlements in the area.¹³⁵² It did not reveal when the study was done, nor if its activities or army operations had any impact on these people whose presence was admitted (“low density population settlements”).

Lundin added that Lundin employees present prior to and during the September-December 2000 construction of the all-weather oil road said that they did not witness forced removal of the local population. When company representatives visited the “habited areas along the road” in January 2001, “no signs of destruction were observed.”¹³⁵³

The Lundin statement, however, is limited to refer only to what the employees saw first hand—in Block 5A.

Lundin hastily conducted an investigation into the displacement alleged by Christian Aid in its concession, through its president Ian Lundin, and issued a letter to its shareholders, undated but published on Lundin’s website on or before March 31, 2001.

We wish to state categorically that we have not witnessed any such acts [displacement] nor would we tolerate such acts to take place for our presumed benefit. . . .

We have taken these claims very seriously however, and have thoroughly discussed them with our people on the ground, government representatives as well as other people operating in the area. Our staff working locally has refuted in no uncertain terms these allegations . . . ¹³⁵⁴

It was around this time, however, that Swedish journalist Anna Koblanck visited the oil road with two Lundin employees, and published an article on April 28, 2001, that contradicted many Lundin assertions.¹³⁵⁵

Lundin asserted that the NGOs and U.N. organizations it interviewed “have indicated to us that the local population has more to gain than to lose from our continued presence there.”¹³⁵⁶ The road to the Lundin drilling location in Block 5A, the letter to shareholders claimed, was built after “serious reflection” and was done in a way to avoid population settlements. Lundin said that the residents were glad to have the bridge—which it claimed was built by Lundin¹³⁵⁷—over the Bahr El Ghazal (Nam) River to get to market in Rubkona. What the letter does not mention, however, was that the road cuts through an airstrip which the local people built for delivery of international relief supplies in Kuac; nor that, first under the SPLA and then under other rebels, an Arab-Nuer market existed and flourished in Rupnyagai, which is south of the river and accessible from Block 5A without a bridge, between 1986 and 1997.¹³⁵⁸ Many Nuer sold their cattle there.¹³⁵⁹

Another press release repeated these statements and elaborated on the findings of Lundin’s “investigation,” stating that the U.N. special rapporteur on human rights in Sudan would not have reached his damaging conclusions about the effect of oil operations on the people of Western Upper Nile/Unity State, specifically mentioning Lundin’s areas, if he “had seen first hand what oil means to Unity State and its people, and heard from the local inhabitants how they feel about the presence of oil companies.”¹³⁶⁰

In its first quarter report for 2001, Lundin repeated that, “The Company has faced some heavy criticisms mainly in the Swedish media about its involvement in Sudan. Those criticisms are misplaced and based on unreliable information.”¹³⁶¹

However, Lundin apparently limited its investigation of human rights conditions to talking to those who had not been displaced. “There are witnesses on the ground who are prepared to testify about this,” Lundin stated.¹³⁶² If this investigation was conducted in the presence of Sudan security or military personnel, as has been the case elsewhere in the oil areas, witnesses on the ground would testify to anything they thought the military or security wanted them to say. But Lundin does not disclose many important facts about its investigation, starting out with whether the interviews were private or not.

The report of the investigation excerpted on Lundin’s web site was wrong in several particulars, pointing to a very limited and ahistorical inquiry. For instance, Ian Lundin is quoted as saying that the people in Bentiu and Rubkona area have moved there due to a combination of factors—one of which is seasonal migration. Nuer agro-pastoralists migrate in the dry season to areas where there is water for their cattle. Historically, they never watered or grazed their cattle inside towns. As already quoted above, relief agencies said that those tens of thousands fleeing into Bentiu town in August 2000 were displaced because of conflict.

Furthermore, Mr. Lundin’s description of the war is incorrect in several ways. Lundin’s press release stated, “There had been fighting in the area as a result of rebel attacks on Nuer villages which are under the protection of the SSUM [Paulino Matiep] and SSIM [Riek Machar] forces that are themselves allied with the Government, but the situation had calmed down.”¹³⁶³

As this report demonstrates, this is a one-sided and misleading rendition of what is a complex situation. Maj. Gen. Paulino Matiep, whose territory of origin is almost entirely in Block 4, came into Block 5A to attack, not to protect, villages there and to escort Sudanese government troops to the Ryer/Thar Jath well, where the government set up a garrison in 1999. Numerous interviews and documents, as well as government statements, have by now fully established that the government’s military activities in Block 5A had a single purpose: protection of the oil.

The SSIM forces refer to the forces of Riek Machar, which were overall ineffective in protecting their territory in Block 5A from attacks by Paulino Matiep’s militia. The two forces were technically on the same side, the government’s side, but the Riek forces were less well-armed by the government. They attacked the Lundin drilling rig in Block 5A in May 1999 because of disputes over who was to control or guard the oil in Block 5A militarily. They were attacked by Paulino Matiep and government army soldiers, and they counterattacked, and so forth.

Less than a year later, in January 2000, Riek Machar left the government and formed the Sudan People’s Defence Forces (SPDF), but, by mid-2000, most of the combatants who followed him into the SPDF were unofficially back on the government side again, receiving government arms in order, together with Paulino Matiep’s militia, to attack the forces of Bul Nuer SPLA Cmdr. Peter Gatdet, who had joined the SPLM/A in early 2000. These attacks took place in the Nimne/Nhialdiu/Wicok zone, mostly inside Block 5A.

In other words, Ian Lundin’s investigation was inadequate.

Nevertheless, he was able to give some information about the presence of the Sudanese army along the road. He admitted that “there are small camps of soldiers every 4-5 kilometres along the road and one larger camp near our drill site at Jarayan.”¹³⁶⁴ This confirms what those who saw the road from the air and the Nuer displaced said about the militarization of the road.

Lundin’s “Oil Policy on Sudan” Substitutes for a Human Rights Policy

Lundin adopted a policy on Sudan, posted on its website in 2001, but the policy contained no reference to human rights. Its only reference to the war was Lundin’s belief that “economic gains, when used to improve the socio-economic and humanitarian condition of the Sudanese people, will enhance the prospects of peace in the country. [Lundin] will, within its possibilities, support initiatives that may lead to long-lasting peace in Sudan.”¹³⁶⁵

The significant qualifier in this paragraph is “when used to improve the social and economic condition of the Sudanese people.” There is no evidence Lundin provides or that is elsewhere available that the Sudanese government has actually tried to do this. Nor does Lundin state how or whether it would attempt to ascertain whether the economic gains from oil were actually used by the Sudanese government to improve socio-economic or humanitarian conditions.

To the contrary: in its March 2001 letter to shareholders categorically denying displacement from Block 5A, Lundin admitted that “The list of oil exporting countries that have ongoing civil strife and/or are fighting guerrilla wars is unfortunately long. It includes such countries as Algeria, Angola, Burma, Columbia, Indonesia, Nigeria, Peru, Philippines, Sudan and Turkey.”¹³⁶⁶

None of these countries is notable for its respect for human rights. Nor did Lundin attempt to show that in any of those countries human rights conditions had improved as a result of oil development.

Talisman Buys Lundin’s Non-Sudan Assets, June 2001

In June 2001, Talisman and Lundin agreed to a corporate rearrangement whereby Talisman would buy the outstanding shares of Lundin and Lundin would spin off to a new company its Sudanese and Russian assets, to be owned by the Lundin family and others.¹³⁶⁷ The Sudanese assets included Block 5A, Lundin’s new interest in Block 5B, and its 100 percent interest in the Halaib Block in northeast Sudan.¹³⁶⁸ The new company, called Lundin Petroleum AB, started trading on the New Market at Stockholmsborsen. There was no mention of any trading on the NASDAQ, where Lundin Oil AB had been listed and traded.¹³⁶⁹ The corporate rearrangements meant that there would be no threat of U.S. capital market sanctions applying to Lundin’s operations.

Carl Bildt, who was briefed by Sudan’s foreign minister, Mustafa Osman Ismael, in Stockholm in July 2001, remained on the board of Lundin Petroleum and of Lundin Oil AB after the Talisman acquisition of Lundin Oil’s non-Sudan and non-Russian assets.¹³⁷⁰ He had in the meantime become active in the search for peace in Sudan, meeting diplomats in Europe, North America, and Africa.

After the Talisman transaction was complete, Lundin Petroleum announced that it was in the process of appraising the Thar Jath discovery with a view to completing a conceptual development study. It planned to drill at least one additional exploration and two appraisal wells during the first half of 2002.¹³⁷¹ In October 2001, Lundin issued new shares with preferential rights to existing shareholders of Lundin, in order to raise money to finance the development of the Thar Jath (Ryer) field on Block 5A.¹³⁷²

Lundin Suspends Operations Due To “Insecurity,” January 2002-April 2003

In December 2001, a Lundin helicopter was shot and its pilot gravely wounded. He managed to land the plane and was evacuated to Khartoum and then to South Africa for treatment. ¹³⁷³ According to confidential sources, the helicopter was shot down by members of the Paulino Matiep militia after the pilot refused to give them a ride.¹³⁷⁴

In January 2002, the militia that had been guarding the Lundin installations in Block 5A since 2000, led by Cmdr. Peter Paar Jiek of Riek Machar’s SPDF forces, formalized in writing a standstill agreement first concluded in August 2001 with Cmdr. Peter Gatdet of the SPLA, ending the war of the “Peters.”¹³⁷⁵ Cmdr. Peter Paar then ceased to guard the Lundin installations.

These two events, the helicopter shoot-down and the defection of the pro-government militia guarding its installations, combined to cause Lundin to suspend activities. On January 22, 2002, Lundin announced that its operations in Block 5A would be suspended “as a precautionary measure to ensure maximum security for its personnel and operation.”¹³⁷⁶ This announcement came three days after the signing of a ceasefire to be monitored by international inspectors in the Nuba Mountains, which Lundin noted hopefully in its press release.¹³⁷⁷ In its letter to shareholders after the Block 5A suspension, it referred to “deteriorating security conditions” in that block as the reason for suspending activities.¹³⁷⁸ Lundin retained hope, however, that the U.S. peace effort started in late 2001 under Senator John Danforth would permit a ceasefire which would allow Lundin to re-start its operations in the dry season, beginning in December 2002.¹³⁷⁹

But Lundin, even as it recognized in a letter to shareholders that its engagement in Sudan had raised ethical issues, narrowly defined the issues to ignore displacement: “The question being raised is whether oil fuels the war or sets the conditions for peace by providing the country with the necessary means to lift itself out of poverty. We believe in the latter.”¹³⁸⁰ Lundin did not offer any evidence or basis for this belief, however.

In releasing its six-month report for 2002, Lundin underlined its continuing desire to develop its Sudan assets: “We are long-term investors and remain fully committed to exploiting the resources in Sudan . . . . The quality of our assets in Sudan are world-class with the Thar Jath discovery estimated to contain 1 billion barrels in place and the rest of our acreage having excellent exploration potential.”¹³⁸¹

On July 24, 2002, days after the landmark Machakos peace protocol was signed by the Sudanese government and the rebel SPLM/A, Lundin’s chairman stated: “We hope the [Machakos peace] discussions will lead to a full and sustainable peace agreement that will allow us to resume operations.”¹³⁸² A ceasefire between the two parties was signed in October 2002. Operations in Block 5A resumed in April 2003 after a fourteen-month suspension, although no peace agreement had been reached. In June 2003, Lundin sold out its interest in Block 5A to Petronas, retaining the Block 5B concession.

Lundin Community Development Program

The Lundin consortium began a community development and humanitarian assistance program (CDHAP) in 2001.¹³⁸³ One of its objectives was to provide a better quality of life “for the current and future inhabitants” of Block 5A (emphasis added).

One activity was to supply fresh water, because there was no good supply in the area. Lundin was trucking in water to water cisterns placed along its all-weather road, where it also drilled six water wells. Lundin repaired ten water wells in Ler, a garrison town. A Sudanese medical doctor retained by Lundin did a needs assessment onthe feasibility of providing permanent medical services in the area. Lundin decided to rebuild the existing hospital in Ler, presumably the brick building constructed by the British that MSF-Holland used for a decade (1988-98) until it was repeatedly looted in the fighting.¹³⁸⁴

Lundin’s CDHAP booklet notably contains aerial photographs of a temporary (dry season) Nuer settlement and a Nuer village. It also contains a photograph of the bridge linking Rubkona to Bentiu over the Bahr El Ghazal (Nam) River, and a bus at Jarayan well.

When interviewed by human rights investigators, however, those displaced from Block 5A in 2002 were not aware of any of Lundin’s “social investment” activities. The investigators noted, “Although one of the oil business's contributions made by the Lundin Petroleum-led consortium for the development of the region was the building of a bridge over the Bahr el Ghazal [Nam] River, the bridge’s only tangible impact on the well-being of the local communities has been to enable Baggara horsemen and mechanized Government forces to access the area, and to kill, rape and chase away the people.”¹³⁸⁵

Block 5A was the focus of increasingly heavy government military operations from 1998 to date. In these operations government forces have relied on the oil company road and the bridge for access to the areas that they have targeted, generating increasing numbers of wounded and killed, as well as tens of thousands of displaced persons. The Sudanese government forces continued to fight to militarize and control the Lundin oil areas even after signing a ceasefire agreement in October 2002, notably in January and February 2003 during a dry season offensive in Block 5A documented by the Civilian Protection Monitoring Team (CPMT).¹³⁸⁶

While Lundin’s development projects may have assisted some people in the area of its operations, they cannot compensate for the abuses that those people have suffered because of the fighting connected to oil development.