Talisman delays sale of Greater Nile Oil Project stake

By an OGJ correspondent

NICOSIA, Jan. 3 -- Talisman Energy Inc., Calgary, has delayed until Jan. 31 the sale of its 25% interest in the Greater Nile Oil Project (GNOP) to New Delhi-based ONGC Videsh Ltd., extending the earlier date of Dec. 31, 2002.

"The delay is the result of a number of factors, including seasonal activities in various countries and complexities related to the consortium members' interests," Talisman said in a statement issued Dec. 31.

On October 30, Talisman had entered into a definitive agreement with ONGC Videsh—the international unit of India's state-owned Oil & Natural Gas Corp.—for the $758 million sale but said that the transaction was subject to "consents from the government of Sudan and the other consortium members."

Those other consortium members include China National Petroleum Corp. International (Nile) Ltd. 40%, Malaysia's Petronas Carigali Nile Ltd. 30%, and Sudan's Sudapet Ltd. 5%.

Talisman said it remains in discussions with Sudan and other consortium members and anticipates that the sale will be completed prior to the revised Jan. 31 deadline, for the same consideration as previously announced.

Talisman acquired its operatorship and 25% interest in GNOP in October 1998 through the acquisition of Arakis Energy Corp. for about 8.9 million common shares of Talisman (OGJ, Oct. 19, 1998, p. 44). Talisman's acquisition provided an infusion of capital that enabled the consortium to complete a 930 mile pipeline to transport oil from fields in southern Sudan to an export terminal near Port Sudan on the Red Sea.

The pipeline began filling with crude in July 1999, and the first cargo of "Nile Blend" departed the export terminal in early September 1999. Originally constructed to move 150,000 b/d of oil, the pipeline has a current capacity of 250,000 b/d and can be expanded to 450,000 b/d.

Talisman, however, came under heavy public criticism for its work, with a Canadian government investigation concluding that oil revenues from GNOP were helping to exacerbate the country's civil war by increasing revenues for the Sudanese government. Human rights groups also argued that Talisman's involvement served to support the forced displacement of people to make way for oil exploration, and the Sudanese government had used oil revenues for arms purchases.

Rights groups further alleged that oil production facilities themselves, especially airstrips, were used by the Sudanese military to prosecute the 19-year war against southern rebels.

All of that made the oil fields a focus of attention for the rebel Sudan People's Liberation Movement/Army (SPLM/A) which said the country's oil installations were a "legitimate military target." Even as the Sudanese government declared its intention to double oil production from the current 240,000 b/d, the SPLM/A repeatedly aimed to disrupt production or halt it completely.

In August 2001, an attempt by the SPLM/A to blow up Sudan's oil export pipeline was thwarted, but the rebels claimed to have killed 42 government soldiers in an earlier attack and to have inflicted "extensive damage" to oil facilities.

In November 2001, the SPLM/A said it ambushed an army convoy traveling near GNOP facilities, and stated that such attacks would continue until "oil exploration, exploitation, and development come to a halt."

While Talisman officials insisted their presence in Sudan was "a force for good," war over the oil fields, as well as continued claims by human rights groups, adversely affected the company's investors.

"Shareholders have told me they were tired of continually having to monitor and analyze events relating to Sudan," said Talisman president and CEO, Jim Buckee, when announcing the sale in October. "Selling our interest in the project resolves uncertainty about the future of this asset," he added (OGJ Online, Nov. 5, 2002).