Total to restart South Sudan seismic work
September 25, 2007 (LONDON) — Total SA (TOT) intends to restart seismic and drilling work in south Sudan either late 2007 or early 2008, with a view to start oil production five to six years later, a spokesman for the French oil major said.
But the cautious strategy crafted by the French major, which has to engage with U.S. pensions funds and help its U.S. partner Marathon Oil Corp. (MRO) sell its stake, underscores the complexity of producing oil in nations under U.S. sanctions.
After Russia and Iran, Sudan is the latest example of how oil majors are caught between rising global tensions and the need to supply the world’s energy demand.
The Total statement follows a Sudan government decision in June confirming rights on a key south Sudan oil exploration block to Total and its partners.
A large part of the 118,000 square kilometers block, thought to contain significant reserves of oil, had been claimed by tiny U.K. company White Nile Ltd (WNL.LN).
White Nile didn’t return a request for comment Tuesday but said in July it was seeking clarifications over plans by the state to withdraw its license.
Total, which owns 32.5% in the block, explored the area in the 1980s before war made operations impossible.
A Total delegation went to Juba early September and met south Sudan government officials there.
The company will now assess the possible presence of land mines and local humanitarian needs, the Total spokesman said.
A spokesman for Marathon Oil Corp. (MRO) said it intended to sell its 32.5% stake in the block by the end of 2007 because of U.S. sanctions prohibiting investments by U.S. companies in Sudan.
A person familiar with the divestment talks said White Nile was barred by Sudan to buy into the Marathon stake.
The Total spokesman said the company and its partners are in talks with potential buyers, including a company from south Sudan, possibly Nile Petroleum Corporation, which could take 10%.
A new partner will be buying the remaining stake, he added. But as it prepares to return to South Sudan, the company also has to talk to U.S. pension funds, some of which may have to sell their Total stock as a result of its business in the country. Several U.S. states have passed or are debating legislation requiring their pension funds to cut investments in companies doing energy-related work in Sudan, as alarm grows over atrocities committed in Darfur.
Some pension funds are also voluntarily barring investment in companies operating in Sudan when they are not satisfied with their impact on this country’s human rights.
That’s what California Public Employees’ Retirement System, or CalPERS, did with nine companies last year while deciding to retain shares with other groups operating in Sudan by committed to human rights.
Jean-Francois Lassalle, Vice President for Public Affairs at Total’s Exploration & Production unit, said it is in discussions with U.S. pension funds, including CalPERS, on the human rights aspects of the company’s return to Sudan. CalPERS confirmed the discusions and said last month it owns 5.6 million of Total shares valued at $436.5 million. Lassalle said the company is particularly emphasizing that its operations are in South Sudan. The region suffered until recently from a conflict with the central government as Darfur now does.
The company is explaining to funds its plans for economic development in the region, Lassalle said. “Investment is needed if one does not want South Sudan to find itself at risk of war. This is the only way to avoid a future war,” he added.
(Dow Jones)