The implications of the August 5th attack on Talisman Energy’s Heglig oil facilities by the Sudan People’s Liberation Army (SPLA) continue to become clearer, even as Talisman has added nothing to its account—and the Government of Sudan continues to deny any attack occurred. The oil concession areas near Heglig have recently seen several major military successes by the SPLA, even as a highly reliable source has very recently revealed that the Heglig attack damaged a Talisman helicopter on the tarmac, and that this has prompted the insurance carrier for Talisman’s helicopter company to suspend insurance coverage, citing the fact that Talisman is “operating in a war zone.” Indeed, further damage, perhaps greater and more deadly, seems distinctly likely. And as military pressure increases, Talisman’s exit from Sudan will become ever more difficult.
Eric Reeves [August 29, 2001]
Northampton, MA 01063
How likely is it that Talisman will find a Western buyer for its Sudan stake when one of its helicopters has been damaged in an attack on its central project facilities (this fact has been confirmed by multiple sources)? What does it say that Vancouver Island Helicopters, with whom Talisman has contracted for helicopter service, has lost insurance coverage because its carrier refused any longer to provide insurance in a “war zone”? How much will even the Chinese or Malaysians pay for Talisman’s 25% stake when the Western Upper Nile concession areas seem to be the site of more, and more consequential, attacks by the SPLA? (See below the most specific SPLA account to date of how the Heglig attack was conducted, including details of the weapons used.)
High-level Western government officials have indicated that Talisman has made it plain that they wish to exit Sudan, but that the Government of Sudan (GOS) is balking at allowing a sale to either Petronas (the state-owned Malaysian oil outfit) or China National Petroleum Corp (China’s state-owned oil giant). Khartoum apparently has indicated that it wishes neither Petronas nor CNPC to become a majority partner within the Greater Nile consortium (the consequence of either company picking up Talisman’s 25% stake). Khartoum is also clearly loath to give up the moral cover for its oil operations, which Talisman has been so willingly and generously supplying. Moreover, a sale by Talisman in the wake of the Heglig attack would send signals that Khartoum would find highly discomfiting. Beyond this it would be most inconvenient for the GOS: an authoritative source reports that Talisman’s helicopters have continued to ferry high-level GOS military personnel between Khartoum to Heglig, and the Gagnon/Ryle assessment report [May 2001] confirms that the Heglig airstrip continues to be used for offensive military purposes by Khartoum.
In short, an asset that was recently assessed at over C$1 billion is now without any imaginable Western buyers, is steadily losing value as security risks go up, and may be without even Asian or Arab buyers. All the while Talisman’s share price, pounded by relentless divestment pressures and the growing threat of US capital market sanctions, continues its highly distressed drift at under 3x cash flow for 2001. Something has to give, and the most obvious candidates are the price of Talisman’s Sudan asset—and their share price. The Sudan exit strategy that analysts and commentators have, with facile assurance, presumed to be in place would seem to be falling apart rapidly.
Just how rapidly this strategy is unraveling can be gauged in part from recent SPLA military successes in western Upper Nile province. Heglig lies just over the provincial border between southern Kordofan and western Upper Nile; but the Unity concession, the Block 4 concession, indeed the vast majority of Talisman’s concession holdings are in western Upper Nile. And the attack on Heglig was mounted by the growing SPLA forces in western Upper Nile. Morale among these SPLA forces is extremely high, and their weapons supplies have dramatically increased with recent significant captures from GOS convoys.
Most recently, the SPLA claims to have attacked and defeated a convoy of battalion-size near Panaru in western Upper Nile on August 9. According to the SPLA they killed 42 government soldiers and captured a great deal of light and heavy equipment. The SPLA also claims to have captured a steamer and several attendant motor boats on the White Nile between August 15 and 16, effectively blocking river transport between the towns of Malakal and Juba (far to the south in Equatoria).
The SPLA claims that the steamer and the motor boats belonged to the El Salaam Petroleum Company, and were being used for military reconnaissance. In their dispatch, the SPLA also claimed that, “the steamer and the three motor boats were ferrying GOS soldiers and their allied militias to protect oil installations and fight the SPLA. They are therefore legitimate military targets.” This military event, if confirmed, gives the SPLA significant additional control over central Upper Nile, and increases the general military pressure on GOS forces trying to protect or clear tens of thousands of square kilometers of concession areas. Intense military activity continues in the Bentiu, Wankai, Mayom, and—according to the SPLA dispatch—Heglig areas. The fact that this is the rainy season in the region insures that GOS heavy military equipment is useless unless it remains on all-weather roads.
The subject of the Heglig attack is one the SPLA continues to return to, even as Talisman stonewalls and the GOS denies. There has still, 24 days after the attack, been no confirmation by journalists or independent investigators of the “minimal damage” assessment Talisman has offered. The SPLA, on the other hand, offered a highly specific account once all their attacking forces had retreated from the area and been fully debriefed:
“Meanwhile details of the August 5th attack on headquarters of the Greater Nile Petroleum Operating Company (GNPOC) at Heglig have been received. The raid that lasted two hours was successful and caused great damage. Of the 15 Grad-P rockets fired by SPLA forces, 12 hit their targets. One rocket hit the Heglig airstrip destroying a helicopter. The main electric power station was hit and is severely damaged. Since 5th of August there has not been electricity in the whole of the oil fields including Bentiu town.”
“Five installations were destroyed including, one big oil fuel reservoir of 60 metre-diameter and four smaller reservoirs. Reliable sources, however, confirm that foreign oil workers were evacuated one day in advance. The enemy appeared to have detected the presence of the mission in the area.”
This SPLA/M account has been partially confirmed by aerial overflight of a largely deserted Heglig at 1300 ft on August 14. As reported by this source on August 15 (full text available on request):
“The pilots of the plane [flying over Heglig] reported that no cars were in evidence and only three people were visible. The pilots further reported that the natural gas-fired generators at Heglig are off, and there is no power in evidence anywhere in the area. Significantly, the SPLA claims to have heavily damaged the electrical generating station.”
“This source (with excellent contacts throughout southern Sudan) also notes that reports reaching him from the field indicate that everything at Heglig is shut down, including the very large reservoir tanks. He has also spoken directly to the team leaders of the [SPLA] force that attacked Heglig in confirming these details.”
Further confirmation has come from a number of regional sources. Moreover, the loss of electricity in the Heglig area, reaching to Bentiu, could presumably be independently verified, and a determination made about the relation to the claimed attack on the electric power station at Heglig.
The upshot seems clear: the SPLA will wait for the military opportune moment and strike Heglig again. If the GOS draws too many of its forces in to protect Heglig, peripheral parts of the Greater Nile project infrastructure and security (e.g., production and exploration wells, the pipeline, perimeter garrisons) will become even more vulnerable.
In all ways, oil development is at the center of Sudan’s catastrophic civil war; and Talisman is at the epicenter of oil development in Sudan. They have paid, and will continue to pay, a brutal price. Tragically, that price may soon be measured in lost Canadian lives.