Oil in Sudan, June 14, 2000

South Sudanese Friends International (SSFI)
[email protected]
Web Address of this report: GOES HERE.


The Problem

If oil is discovered in your backyard, that is ordinarily cause for rejoicing. Not so in southern Sudan. There, oil has been not even a mixed blessing-- it is a curse. Because of the oil, the Khartoum government has preferred anarchy to local government in southern Sudan. To the extent that the oil has actually generated revenue, that revenue has been used up in the war, along with many lives of both northern and southerners. The South has lost the schools it once had and gained nothing but the roads and pipeline needed to remove the oil. If the oil suddenly disappeared, Sudan would be a far happier country.

The biggest problem is that oil has created an incentive for the Khartoum goverment to oppress southern Sudan. The first civil war in Sudan was ended by the Addis Ababa Agreement of 1972. This agreement was known worldwide as the textbook example of a successful resolution to a civil war. Southerners accepted that Sudan was a united country, in which the northerners would inevitably control national and international policy because of their majority of population and wealth. Northerners accepted self-rule for the south, including allowing the south to have a freely elected government even thought the North continued under the Nimeiry dictatorship. The situation was not perfect, as Sudan continued to have the same problems of poverty and corruption as most African countries, but at least there was peace and a reduction in complaints of northern colonialism.

Oil disrupted this equilibrium. After it was discovered in the late 1970's, President Nimeiry decided to break the Addis Ababa Agreement. He announced that the oil would not be refined in the south, dissolved the southern elected government, split the south into three provinces, and in 1983, in a surprise move, imposed Islamic law on all of Sudan. The point of Islamic law seems to have been not so much religious as to please northern factions that Nimeiry previously had not thought worth conciliating at the expense of southern support. If he was going to ruin his relations with the south by taking all the oil, he might as well please some people in the north by imposing Islamic law. In addition, if Sudan was an Islamic state, non-Moslems would be denied political positions-- and so southerners would be denied any influence on how the oil money would be spent.

Predictably, civil war broke out in 1983. Southern army units mutinied, the tribes armed themselves and created new militias, and Marxist Ethiopia seized the opportunity to support rebel groups. This was not a conventional war of north against south, however, but a war with many sides, of which the northern army was only the most powerful. The northern regime armed Arab and southern militias and bandits, and the southerners themselves were organized in numerous groups, varying in their motives from a desire for freedom, lust for power, Marxist ideology, defense of the local village, and simple banditry. This war has continued to the present time.

The importance of the oil is in two things. It seems the Khartoum government would be happy just to control the oilfields and transportion for oil, which included pipelines and roads. This has two consequences. First, the Khartoum government has been content to leave the south in anarchy rather than spend enough money to "win" the war. This leaves the south in constant warfare, with violence that is both bad in itself and prevents economic development, a result possibly worse than a northern victory. Second, since the Khartoum government does want to protect the oil, it has been ruthless in doing so. People living near the oil have been forced to leave, and the government has kept up the war so as to protect the oilfields.

The main-- perhaps the only-- beneficiaries of the suffering are the foreign oil companies. They get to drill the oil and take a share of the profits. The division of labor in the oil-company-government partnership is that the oil company extracts the oil and the government prevents opposition to the extraction, splitting the profits. Other entities also benefit: e.g., Goldman Sachs provides financing and the government of Canada gets taxes from Canadian oil companies. All these parties bear moral blame. In fact, it could well be that they benefit more than the government of Sudan, which must spend much or all of its share of the profits on the army-- a production expense.

SSFI takes no position on who in Sudan deserves the profits from oil drilling. We only note that the current situation is good for neither the north nor the south. If even 5 percent were given to southern Sudan, it would be better off than it is now, with 0 percent and anarchy. If even 5 percent were given to northern Sudan, it would be better off than now, with 100 percent, but heavy military spending. Who deserves the oil profit is a difficult philosophical question that we will not address here except to note that natural resources are a gift of God, equally undeserved by the people lucky enough to live where they are discovered and by the people who live 500 miles away.

Quite apart from the question of how the oil revenue should be spent, however, we can say a number of things about what foreign oil companies should do.


The Amount of Oil Money

Sudan's proven oil reserves are estimated at about 700 million barrels (REUTERS, May 10, 2000, "Sudan now self-sufficient in oil, to export petrol," Alistair Lyon, http://www.sudan.net/wwwboard/news/30832.html, May 26, 2000). At 10 dollars per barrel, the value of the oil would come to 7 billion dollars. Estimate of oil reserves range from 300 million to 3 billion barrels, however, depending on definition and opinion.

The estimated oil revenue for the Sudanese government is $1,000,000 per day, which by odd coincidence is about equal to three other key figures: the government's spending on arms, the amount Sudan used to spend on imported oil, and the amount spent on relief by Operation Lifeline Sudan, the United Nations umbrella organization.

On the first day of oil export shipments in 1999, an import shipment of 20 Polish T-55 tanks arrived in Port Sudan.


Maps

The following SSFI map shows features relevant to oil and to the civil war.Also see the Talisman maps of the Heglig oilfield region (also available in close-up) and of the pipeline route.

11 detailed maps covering all southern Sudan were produced by Save the Children and funded by USAID and are available at Www.state.gov/www/issues/relief/sudan.html. ReliefWeb has about ten maps of various kinds, including maps of agricultural regions, etc. at Www.reliefweb.int/mapc/afr_ne/index.html. The University of Texas as a good map collection,with U.S. government Sudan maps at Www.lib.utexas.edu/Libs/PCL/Map_collection/sudan.html.


The Companies Involved

Much of Sudan is being explored for oil, including the Suakin region near the Red Sea, but Upper Nile province is of most concern to us. The business organization is complicated and interlinked. There are both private and government-owned companies, and many of them have subsidiaries or joint ventures with different names. Moreover, territory is allocated by the Khartoum government in concessions to consortiums of several companies. The main one is the Great Nile Petroleum and Oil Corporation (GNPOC) in Heglig, which is composed of the following companies.

  1. The China National Petroleum Corporation (CNPC) has a 40 % share. It is controlled by the government of Communist China, but partly owned, under the name of PetroChina, by private investors around the world. This includes a $ 576 million investment by BP Amoco.

  2. Petronas (Petroliam Nasional Berhad), owned by the Malaysian government, has 30%.

  3. Talisman Energy, a private Canadian company, has 25%.

  4. Sudapet, owned by the government of Sudan, has 5%.

The second consortium operates the Block 5A concession. It is composed of the following companies.
  1. International Petroleum Corporation (IPC), owned by Lundin Oil AB, a private Swedish company, has 40.357%.

  2. Petronas (Petroliam Nasional Berhad), owned by the Malaysian government, has 28.5%.

  3. ÖMV (Sudan) GmbH, an Austrian company, has 26.125%.

  4. Sudapet, owned by the government of Sudan, has 5%.

Other oil companies involved include
  1. Agip, an Italian company that is a subsidiary of Eni. On September 11, 1999 it reportedly sold its Sudan oil operations to a Mauritius businessman, Mr. Kotak, to be operated under the name GAPCO). Its website also reports that it sold it gas station operations in Sudan in 1999. Eni has also done extensive engineering and construction for the oilfields and pipeline.

  2. Gulf Petroleum Company, owned by Qatar Petroleum Company and two Sudanese companies, Concorp and National Petroleum Company. It owns an oil field at Adar Yale in Upper Nile. This is the older and smaller oil area in Sudan.

  3. National Iranian Gas Company (NIGC), owned by the government of Iran.

  4. TotalFina(France).

  5. Trafigura Beheer B.V. (the Netherlands) is an oil wholesaler who has signed a contract with the Sudanese government to market most of its oil (Amnesty International Report, p. 3).
Royal Dutch Shell (The Netherlands and Britain) owns a refinery in Port Sudan. The newest refinery is at El-Geili, 44 miles north of Khartoum. El-Obeid has a smaller and older refinery.

An oil field exists at Suakin, in Sudan but on the Red Sea rather than near the Coast. Amni International Petroleum, of Nigeria, is one company operating there. Arakis, which Talisman bought into, is another.

In March, 2000, the Khartoum government signed a new oil exploration agreement for the Upper Nile area around Melut near the Ethiopian border with a consortium of Gulf Oil Company (Qatar) and al-Ghanawa (Sudan) with a 46% stake, three unnamed Canadian and European companies with 46%, and Sudapet with 8%. Fosters Resources is one of the Canadian companies. Melut Petroleum is the name of the joint venture.

Work on a pipeline some thousand miles long to take out the oil began in 1997 and was finished in 1999. Building and maintenance includes Denim Pipeline Construction Ltd (Canada), Roll’n Oil Field Industries (Canada), Mannesmann (Germany), the Europipe consortium, Weir Pumps Ltd (United Kingdom), Techint (Argentina), Allen Power Engineering Ltd (United Kingdom), and, most importantly, the Chinese government.

There has been heavy military involvement with the pipeline and oilfields. The Sudanese army has of course been involved, but there are also plausible reports of Chinese army soldiers, and mercenaries from Malaysia and Branch Heritage, an offshoot of the celebrated Executive Outcomes. Local warlords are no doubt also being employed. Such facts as who is hiring what soldiers and which soldiers are depopulating the villages and which merely defending oil facilities are hazy, and the oil companies do not grant the access needed by independent reporters to find out how deeply they might be implicated in the atrocities.

In Nairobi, Kenya on 23 October,1999, U.S. Secretary of State Madeleine Albright said, "We have our sanctions, but other countries are engaged in what they're calling a critical dialogue and are looking at ways to help them expand their oil drilling. We're going to have to talk to some of our allies about ways to put pressure on Khartoum." ( http://www.security-policy.org/papers/1999/99-C132.html)

"Doing business with GNPOC or Sudapet, like doing business with the Government of Sudan, carries criminal penalties of up to $500,000 per violation for corporations and up to $250,000 for individuals, as well as imprisonment of up to 10 years. Civil penalties of up to $11,000 per violation may be imposed administratively by Treasury's Office of Foreign Assets Control (OFAC)." However, the U.S. Treasury immediately gave special exemptions to China National Petroleum Corporation, Petronas, and Talisman, which are 95% of GNPOC. (Casey Institute, " 'Classic Clinton': Like Canada, U.S. refuses to Sanction Sudan's Foreign Oil Partners -- But Pretends to Do So," Publications of the Center for Security Policy No. 00-F 10, 16 February 2000, http://www.security-policy.org/papers/2000/00-F10.html.)


Bad Things That Are Happening

Since this area is important to the Khartoum government, though, outsiders are not allowed access, and it is hard to verify reports of atrocities. Rumors swirl of Chinese forced labor and Arab slave trading, rumors that the government and the oil companies have not been willing to disprove by allowing reporters access. What seems clear is that the oil areas have been violently cleansed of southerners, that the drilling has provided no spillover benefits to local people, and that oil company facilities are routinely used for terror raids against civilians.

The best source of information is the Harker Report, commissioned by the Canadian government and released in early 2000. Its concern is with the involvement of Talisman, a Canadian company, not with oil drilling generally. The excerpts below from the long (100+ pages) report will give you an impression of what is happening. Note that other companies, such as Swedish Lundin, Malaysian Petronas, and the Chinese state oil company, have not been even as open as Talisman, and presumably have even more to hide.

Some excerpts from the Harker Report:


What the Oil Companies Should Do

  1. One good option, which Chevron and other companies have taken, is simply not to be in the oil business in Sudan while the current oppression continues. This is not the only option, but it is the simplest, and raises the least temptation to sacrifice principle for greed.

  2. Oil companies should help the people of southern Sudan, in verifiable ways, out of their own budgets. This help should not be simple food aid, but investments in the future-- farming equipment and infrastructure. Special help should be given to anyone displaced by the Khartoum government's ethnic relocations done to protect the oilfields.

    Oil companies should have publicly monitored discussions with the government about human rights abuses. Public monitoring is crucial, because otherwise it is unlikely such discussions will really occur.

  3. Oil companies should insist that the government of Sudan allow them to invite independent investigators be allowed to travel in the oil areas in which they operate with cameras and tape recorders and let the world know what is going on there. If there is no oppression in a company's concession, the company has nothing to fear from this.

  4. Oil companies should reveal, in a way that can be independently verified, what fraction of the oil revenue is going to expenditures that benefit local people. If that fraction is 0 or 1 percent, the world should know, as a basis for discussion of whether such a fraction is just.

  5. Oil companies should allow independent observers such as newspaper reporters free access to any facilities they pay for-- road, airfields, and so forth-- to monitor whether they are being used for military purposes by the government of Sudan or by quasi-governmental military units.

  6. People who benefit from the oil operations in southern Sudan have a moral responsibility for what happens there. If you benefit from advantageous terms because other companies are too conscientious to be there, or if your income would fall if the government of Sudan did not engage in oppression, then you should be troubled.

    This goes well beyond simply doing business with an oppressive government. We are talking about earning extra income because the government is oppressive, perhaps benefiting even more from the oppression than the government does itself. You need not be a hired mercenary or an oil company executive to be in this category, though we appeal to those people too. You might just be a shareholder in Talisman or one of the companies that has a contract for oil drilling supplies. If you are, please ponder what we have said.

  7. We make no comment on how the oil revenue should be distributed between North and South, which is a political rather than a humanitarian question.

Oil companies may also wish to take note of the legal ramifications of atrocities in Nazi Germany that are still arising in 2000, some fifty years later. Particularly if the government of Sudan changes in the next 50 years, it might well happen that companies now operating in southern Sudan may acquire legal liability, even if the companies themselves are unaware of atrocities in which they are peripherally involved. This is especially true if the companies receive any benefit from the atrocities, even indirectly, although liability might well be limited to restitution. The legal risk is highly uncertain, partly because it depends on political changes over the next half-century in Sudan and other countries where an oil company operates.


References

Casey Institute, " 'Classic Clinton': Like Canada, U.S. refuses to Sanction Sudan's Foreign Oil Partners -- But Pretends to Do So," Publications of the Center for Security Policy No. 00-F 10, 16 February 2000, Www.security-policy.org/papers/2000/00-F10.html.

Casey Institute, "Washington Post, Madeleine Albright See the Light: Campaign to Block Sudan-Chinese Oil Entente Gains Ground," Publications of the Casey Institute of the Center for Security Policy No. 99-C 132,15 November 1999, Www.security-policy.org/papers/1999/99-C132.html.

"Human Security in Sudan: The Report of a Canadian Assessment Mission Prepared for the Minister of Foreign Affairs Ottawa," January 2000 [the Harker Report], Www.dfait-maeci.gc.ca/foreignp/menu-e.asp.

"Sudan now self-sufficient in oil, to export petrol," REUTERS, May 10, 2000, Alistair Lyon, Www.sudan.net/wwwboard/news/30832.html, (May 26, 2000)

Mbendi Information for Africa, "Oil Industry Profile Sudan," Mbendi.co.za/cysuoi.htm (June 14, 2000).

Vitrade, "Follow the Money; Who is Financing the War in Sudan?" Www.vitrade.com/ (May 26, 2000).

Vitrade, "In Sudan, it is difficult to tell the players without a scorecard. Here is your scorecard," Www.vitrade.com/who_is_who/whoiswho.htm (May 26, 2000).

"Influential Desmarais family has ties to Sudan TotalFina's oil interest," Paul Waldie, Claudia Cattaneo and Kathryn Leger, National Post, Friday, November 26, 1999, Www.vitrade.com/talisman/991126_influential_desmarais_family_ties_Sudan.htm.

"B.C.'s Lundin family doesn't let politics get in the way International empire," Ian McKinnon, National Post, Friday, November 26, 1999, Www.vitrade.com/talisman/991126_lundin_oil_family_politics.htm.

TotalFina proves it won't shy away from controversy. Tackles world hot spots: It's the largest oil and gas producer in Africa and owns a concession in Sudan," Claudia Cattaneo, National Post, Friday, November 26, 1999, Www.vitrade.com/talisman/991126_totalfina_proves_it_won.htm.

"Meeting the victims of Sudan's oil boom Death and displacement: Canadian company claims ignorance of atrocities," Charlie Gillis, National Post, Saturday, November 27, 1999, Www.vitrade.com/talisman/991127_meeting_the_victims_of_sudan.htm.

"Exploiting Sudan's Agony," The Washington Post, November 15, 1999, Www.vitrade.com/editorials/991115_wp_editorial.htm.

"Drilling for a corporate conscience Talks have broken off between Talisman Energy and four NGOs. Activist Ernie Regehr explains why," The Globe, ( Members.tripod.com/SudanInfonet/regehr.txt, May 26, 2000)

"Canada to lay down law to Fosters over Sudan deal, "Reuters, March 13, 2000, 18:07:02 EST (-5 GMT).

Amnesty International - Report - AFR 54/01/00, May 2000, "Sudan: The Human Price Of Oil," Www.amnesty.org/ailib/aipub/2000/AFR/15400100.htm.

"No Blood for Oil! Western Firms and Genocide in Southern Sudan - A Human Rights Report by Society for Threatened Peoples," Report No. 25 / April 2000, Www.gfbv.de/gfbv_e/docus/report/sudan_e.htm.

Verney, Peter, "Oil and conflict in Sudan : raising the stakes," Hebden Bridge: Sudan Update, 1999 ,60 pp., ISBN 0 9537678 0 9, (order address: [email protected]). This pamphlet is an excellent survey, with good maps.



SSFI's mission is to share the love of Jesus Christ with the people of southern Sudan in a way that leads them towards peaceful and self-reliant living from the grassroots level, so that available resources will meet the needs of their communities.

South Sudanese Friends International (SSFI)
4503 Northwoods Lane
Bloomington, Indiana 47404
Tel. (812) 333-1798 FAX (812) 855-3150
www.geocities.com/ssfi