Previous PageTable Of ContentsNext Page

Development of the Oil Fields Proceeds Apace

Revenue from development of natural resources has the potential of prolonging the war, reported to cost the government a million dollars a day to prosecute in a country where people earn less than U.S. $2 a day.149

The government of Sudan is doing everything possible to accelerate the exploitation of Sudan=s major oil reserves, located in Upper Nile. The completion of the U.S. $1 billion pipeline from Unity Field in the Bentiu region to the new terminal being built at Port Sudan was on Aa very tight schedule,@ Energy and Mining Minister Awad Jazz said, but one that they hope to meet by June 1999. A 50,000 barrel per day (bpd) refinery costing U.S. $600 million is to be built north of Khartoum for domestic needs, financed with the government=s share of the revenue from the pipeline. The government is counting on construction of the pipeline sparking new interest by foreign oil companies in Sudan.150 The minister said forty-seven international companies were engaged in oil and mining projects inside the country in 1998.151

Arakis bought its interest in 1993 in the former Chevron areas (blocks 1, 2, and 4) north of Bentiu, and began drilling several new wells in the Heglig and Unity fields and reopening other wells Chevron had drilled. Oil produced from the wells, an average of 2,000 bbl/d in 1996, was processed and consumed domestically.152 Arakis entered into a consortium in December 1996 called the Greater Nile Petroleum Operation Company (GNPOC) in order to continue and expand development in these fields, where reserves were estimated from 660 million to 1.2 billion barrels of oil. Arakis held 25 percent (through its wholly owned subsidiary the Sudan Petroleum Project), the China National Petroleum Corporation held 40 percent, Malaysia=s Petronas Carigali Overseas Sdn. Bhd. Held 30 percent, and Sudanese government Sudapet Limited held 5 percent of GNPOC.153

U.S. companies will not be players in this scramble to exploit the oil. Sanctions have been imposed by the U.S. on U.S. companies and individuals doing business in Sudan as a result of the 1993 decision by the Department of State to place Sudan on its list of countries supporting terrorism. These sanctions were tightened starting with a vote in the House of Representatives in July 1997 to force U.S. companies to sever all commercial ties with Sudan on the grounds that Sudan was accused of sponsoring terrorism,154 in response to the revelation that the Clinton administration had exercised its discretion to provide an exemption to allow Occidental Petroleum Corporation to close a multimillion-dollar oil deal in Sudan. Occidental has since pulled out, but the legislation proceeded, and plugged a loophole that had been left by Treasury Department rules in August 1996, which gave the president the authority to grant exemptions to the law.155 The sponsor of the legislation argued that development of the oil fields would help the Sudan government fund terrorism.156 The Clinton administration, which opposed the legislation, by November 1997 had changed its position and by executive order imposed tight sanctions on U.S. companies and individuals doing business with Sudan.157

According to one article, this executive order prohibiting U.S. transactions with Sudan was a serious blow to Arakis, then the lead company in the oil development project, because it prevented this Canadian company from tapping the vast U.S. bond market for its crucial cash needs.158 However, one of the two biggest shareholders of Canadian-chartered Arakis was the Boston-based fund, State Street Research.159

The development of the oil resources proceeded at an accelerated pace. Pipeline construction began in May 1998 and was carried out simultaneously along several stretches of the pipeline right of way. The oil consortium was pursuing an aggressive upstream development program on the concession to achieve a minimum 150,000 barrels per day of crude oil deliverability by mid-1999. The Heglig, Unity, Toma South, El Nar, and El Toor fields would be included in the initial production plans, with a central processing facility at Heglig. The crude oil would then be transported through the main pipeline to the marine oil terminal near Port Sudan for export.160

In August 1998 Arakis agreed to a friendly takeover by Talisman Energy Inc., in which Arakis shareholders would receive one share of Talisman for ten shares of Arakis.161 Talisman is a major Canadian corporation (formerly British Petroleum Canada) and among the top sixty companies on the Toronto Stock Exchange; it is also traded on the New York Stock Exchange. The Canadian Inter-Church Coalition on Africa (ICCAF) called for its supporters to protest the takeover to Talisman before the deal was closed,162 but it was approved by Arakis shareholders on October 7 and finalized.163 The ICCAF later called on the Canadian foreign minister to take action against Talisman. It sought to have Talisman and other Canadian companies working in Sudan placed on the Area Controls List, which would require all exports from Canada to Sudan (including equipment and technology) to have an export permit. It also sought to have the Canadian government impose economic sanctions on Sudan under the Special Economic Measures Act. The Inter-Church Coalition stated that it believed the oil was being used to fuel military activities including the operation of tanks, personnel carriers, and planes that bomb hospitals and displaced persons camps in the war in southern Sudan.164

A Canadian foreign ministry official said that the Special Economic Measures Act has a high threshold: there must be a breach of international security to invoke that act. Whether, in the absence of a Security Council resolution, Sudan=s admitted funding the abusive Ugandan Lord=s Resistance Army might qualify is not yet clear. In addition, the Canadian Area Control List providing for export controls is as yet a very blunt instrument that does not have an exemption for humanitarian supplies, the official added.165

As Canada is a member of the Security Council and in February 1999 its president, it remains to be seen what steps that government will take regarding Sudan and its Canadian-directed oil development project that promises to be an important source of financing for the war in which so many human rights abuses have been committed.

149 Oxfam GG (Great Britain), AGetting back on the road to peace,@ London, August 28, 1998.

150 It would take about fifteen years to recover the cost of the pipeline from transit fees that would be charged to users, a government minister said. Alistair Lyon, ASudan pipeline key to future oil plans,@ Reuters, Khartoum, August 28, 1998.

151 "Sudan To Be Self-Sufficient In Oil By 1999 - Report,@ AP, Khartoum, Sudan, November 24, 1998. Sudan had signed twelve agreements with international companies for mineral and gold prospects, and exported five tons of gold in a Sudanese-French joint venture.

152 "Oil Electricity Profile, Sudan,@ U.S. Energy Information Administration, Washington, DC, October 1998; Arakis Press Release, AArakis Announces Pipeline Under Construction,@ Calgary, Canada, May 7, 1998; see "Black gold crucial to Sudanese peace,@ Calgary, Africa Analysis, No. 297, May 15, 1998.

153 "Oil Electricity Profile, Sudan,@ USEIA; Arakis Press Release, May 7, 1998.

154 David Ivanovich, AUSA: House Votes to Blacklist U.S. Oil Industry Ties to Syria, Sudan,@ Knight-Ridder/Tribune Business News, Houston Chronicle (Texas, U.S.A.), July 9, 1997.

155 Kimberley Music, AHouse Approves Limiting President=s Ability to Bypass Trade,@ The Oil Daily, July 10, 1998.

156 David Ivanovich, AUSA: House Votes to Blacklist U.S. Oil Industry Ties to Syria, Sudan,@ Knight-Ridder/Tribune Business News, Houston Chronicle (Texas, U.S.A.), July 9, 1997.

157 "White House Statement on New Sanctions on Sudan,@ White House, Washington, DC, November 4, 1997: Declaration of Emergency and Imposition of Sanctions, based on Sudan=s sponsorship of international terrorism, efforts to destabilize neighboring countries, and its Aabysmal human rights record.@

158 Jeffrey Jones, ACash crunch may force sale of Canada=s Arakis Energy,@ Reuters, Calgary, Canada, July 7, 1998.

159 Ibid.

160 Arakis Press Release, "Arakis Announces Pipeline Under Construction,@ Calgary, Canada, May 7, 1998.

161 "Arakis CEO says Sudan to support buyout,@ Reuters, Calgary, Canada, August 17, 1998.

162 "Talisman Takeover of Arakis: Urgent Action Required,@ Inter-Church Coalition on Africa, 129 St. Clair Ave. West, Toronto, ON Canada M4V 1N5,

163 "Arakis Holders Approve C$265.8 Mln Purchase by Talisman Energy,@ Bloomberg, Calgary, Canada, October 7, 1998.

164 "Canadian corporate involvement in Sudan Action against Talisman Energy Inc. Needed urgently, Canadian agencies tell Axworthy [minister for foreign affairs],@ Inter-Church Coalition on Africa, November 18, 1998.

165 Human Rights Watch telephone interview, December 15, 1998.

Previous PageTable Of ContentsNext Page