In Sudan, unknown White Nile draws a bead on big Total oil rival
By Neil King JR
June 19, 2006 (JUBA, Sudan) — For 25 years, French oil giant Total SA sat out guerrilla attacks, a bloody civil war and a succession of governments in Khartoum, all in the hope of sucking oil from a vast swath of land along the Nile.
Total’s patience looked like it paid off last year when Sudan ended its long civil war. But as the oil company prepared to resume operations, up popped an even stranger impediment: an imposing former cricket player for the English national team named Philippe-Henri Edmonds, better known as Phil.
Edmonds and his tiny upstart oil concern, London-based White Nile Ltd., have proved themselves worthy rivals to one of the world’s largest oil companies. Touting a theme of “oil for the people,” White Nile has pushed Total off the tract it leased since 1980. The oil patch, roughly the size of Pennsylvania, is regarded by both sides as the most promising in Southern Sudan, potentially holding more than three billion barrels of oil. That’s about as much as has been discovered in the Gulf of Mexico.
White Nile has never scouted or drilled for oil before. Yet the Sudan gambit has provided Mr. Edmonds the perfect perch to champion two of his favorite causes: the rights of black Africa and the enlargement of his personal wealth.
“I can understand why Total is a trifle beefed — there’s a serious amount of oil at stake here,” says Mr. Edmonds, reclining in the VIP lounge of the Juba airport, moments after he’d arrived by jet from Kenya. “But the people of Southern Sudan have every reason to ask why Total should have any of their oil.”
Big Western energy companies are facing revolts around the world, typified by a populist backlash that has stymied operations in Venezuela, Bolivia and Ecuador. The problem is even more combustible in Africa, where wily operators like Mr. Edmonds are tapping political passions and ethnic divides to gain access to oil in Somalia, Ethiopia and even Western Sahara, a disputed no-man’s land.
This isn’t just business as usual for multinationals in developing countries. The oil companies are being shut out of key areas of development by far nimbler rivals who are unconstrained by shareholder concerns or Western business standards.
Edmonds gained his concession — a lease giving the rights to explore and drill — from the government of Southern Sudan, which won limited autonomy in the deal that ended the country’s civil war. Having given the new government a 50% stake in White Nile, Mr. Edmonds calls it “the people’s own company.” He claims the venture will be ready to sink the first of 70 wells by November.
Total’s contract, by contrast, was made years ago with Sudan’s national government in Khartoum, which still officially runs the country and has a 10% stake in the Total consortium. Local officials in the south have barred Total executives from setting foot on the company’s long-held concession. Total is the world’s fifth-largest oil company by market capitalization.
The chairman of Total’s Sudan operations, Nicolas Brunet, expresses amazement that White Nile is proceeding as though Total’s deal didn’t exist. “It is quite incredible that people can behave like that,” he says.
The two companies are feuding both in an English court and in Juba, a malarial would-be national capital that’s tucked away in a corner of Africa where paved roads, telephones and electricity are almost as scarce as laws and policemen.
Visitors these days might easily conclude that White Nile is the only game in town. Passengers disembarking at Juba International Airport pass a large sign featuring the company’s logo — a white river bending through a blue background — and its omnipresent motto: “Our Peace, Our Land, Our Oil, Our Liberty.” Also included are photos of the current southern president, Salva Kiir, and the late rebel leader, John Garang, who died last year in a helicopter accident.
Just up the rutted dirt road into town, workmen are putting the final touches on White Nile’s new headquarters, a refurbished house with a bright blue roof on a corner lot with a sign out front. “White Nile Limited Oil Exploration Welcomes you to Juba,” it says. The company sponsored nearly all the events at a recent festival honoring the ex-rebel army that now rules Southern Sudan. Company T-shirts bearing the legend “White Nile — The South Sudanese Peoples Company” are omnipresent.
“White Nile knows what the common man wants,” says Phillip Ward, the company’s chief operating officer. When in Juba, Mr. Ward can be found most nights with a cigarette wedged between his fingers, buying rounds of beer and passing out T-shirts at an open-air bar along the Nile. He is married to a woman from the Dinka tribe, the largest in Southern Sudan, who grew up in the heart of the disputed oil patch; his father-in-law is a retired Sudanese army general.
Total’s sole southern presence is the preppy and mild-mannered Jerome Servot, a former French military officer and security consultant who works out of a small storefront office on a malodorous side street in Juba. Servot pokes around town in black loafers and green khakis, trying to get appointments with local officials to push Total’s cause.
Servot is adamant that no matter how much help White Nile may need, Total is not offering to be partner. “There’s no way White Nile can do this without bringing in a real major — and that’s not going to be us,” he says.
Total’s roots in Sudan date to 1980 when it teamed up with Texas-based Marathon Inc. and the Kuwait Petroleum Co. to explore a 47,000-square-mile expanse of savannah and marshland on the east banks of the Nile. Total established a base camp on a bend in the river and began seismic tests in 1983, only to see its operation engulfed by an outbreak of Sudan’s long-simmering war. Total pulled out in 1984 after one of its subcontractors was gunned down. For the next 20 years the consortium held onto its lease, citing the war as the reason it couldn’t move ahead.
STORY OF THE TAKEOVER
All that changed in 2004. As the Khartoum government and the rebel Sudan People’s Liberation Army haggled over ending one of Africa’s longest and deadliest civil wars, Total realized it was time to return. In December, it renegotiated a contract with the national oil company, Sudapet Co. Ltd., under which the government would get a larger share of future oil revenue.
A complication arose just three weeks later. The peace deal gave Southern Sudan wide-ranging autonomy, including the possibility of full independence after 2011 and an even split of oil revenue with the north. In addition, Southern Sudanese officials believed they had the power to overrule Sudapet on southern oil rights.
Unbeknownst to Total, Edmonds and his business partner, Andrew Groves, had been talking with members of the SPLA for months about drilling in Total’s tract. “We were just looking for opportunities,” Edmonds says, “and so were they.”
The gap between Sudan’s north and south is an epic one in Africa, a divide made combustible by the discovery of oil in the south. For centuries, Arabs in the north grabbed and sold slaves from the south. The north today is largely Arab and Muslim, while the south is overwhelmingly made up of black Africans, who are either Christian or animist. The strife in Sudan’s western region of Darfur is still more complex, though so far no oil has been discovered there.
Edmonds and his partner are both native Africans who are white and well-to-do. Mr. Groves, 37, grew up in Zimbabwe.
Edmonds’s father was a wealthy merchant and an active promoter of black majority rule in what was then called Northern Rhodesia before the family moved to Kent in southeast England. In the 1980s, Phil Edmonds became a leading member of England’s national cricket team and one of the best-known bowlers, the cricket equivalent of a baseball pitcher, of his generation.
He was, according to Cricinfo.com, a leading cricket Web site, “almost a throwback to an earlier time with his easy, classical action, his flighted orthodox slow left arm, and his aristocratic manner.” He was also aggressive, bowling the occasional ball around his opponent’s head if the batter “started to irritate him.”
Edmonds, now 55, lives in a lavish house in London’s Notting Hill with his wife, best-selling author Frances Edmonds. He has a reputation in Britain as a high-flying entrepreneur with a taste for launching upstart companies. After his cricket career, he went on to make a fortune pursuing minerals in places as far flung as Siberia and the Philippines.
Messrs. Edmonds and Groves jumped into African mining in 2000, seeking out platinum in South Africa, tantalum in Zimbabwe and cobalt in Congo. Asked how they sealed one mineral deal in Namibia, Edmonds in 2002 told the Daily Mail, a U.K. paper: “The rights for these deposits passed to the local tribe. We went along, met the king, had a few beers, and did the deal.”
During repeated trips to South Sudan in 2004, the pair sat down with SPLA leaders, sometimes in military encampments deep in the bush. Edmonds explains their pitch: “We said to them, ‘This is your oil. Why do a deal with Big Oil, who will give you just a few scraps, when you can form your own oil company with us?’ ”
The southern rebels had already created a rival to Sudapet, the national oil company, called the Nile Petroleum Corp., or Nilepet. Its managing director, Bullen Bol, set out to redraw the lines on the Total concession, known as Block B.
“The area was simply too large to be given to one company,” says Bol, a towering man with oversize spectacles, who has worked as a petroleum consultant in the U.K. Bol divided Block B into three sections, putting more than half of the tract, and two of its three main troughs, into a new entity, known as Block Ba.
The SPLA didn’t assign the tracts to any company. So Mr. Edmonds tried to convince them otherwise using one of his favored techniques. On Feb. 10, 2005, he floated White Nile on London’s Alternative Investment Market, a small-company exchange similar to Nasdaq but lightly regulated. The prospectus said the company was looking to explore for oil in Southern Sudan, but had no firm agreement with the government to do so.
In four days the stock hit 138 pence, or about $2.55, up from an opening price of 10 pence. With less than $16 million in cash, White Nile suddenly had a market capitalization of over $360 million. Fearing potential fraud, the London Stock Exchange suspended trading in White Nile shares until the company could clarify its position. “We told the absolute truth, that this was nothing but a shell company,” Edmonds says.
After the stock run-up, Edmonds offered the government of Southern Sudan, via Nilepet, 155 million new shares if the two entities agreed to jointly explore Block Ba. The offer, which Nilepet quickly accepted, essentially made the government of Southern Sudan a 50% shareholder in White Nile. “When the share price rose up, so did the government of Southern Sudan,” Edmonds says.
U.S. government officials are concerned that the White Nile deal could set a bad precedent for Southern Sudan. They suspect, although without any firm evidence, that the British company gave “bonus payments” to government officials to secure the concession. Edmonds denies doing that.
Total cried foul. So did Sudan’s national government in Khartoum, which says the peace agreement gave the south no right to award oil contracts. Total had already faced down human-rights groups criticizing its intention to work in the Sudan in the first place. Now it had to push back against an unknown company that had cut a deal with a nonexistent government.
Ministers in Khartoum insisted Total steer clear of Juba, arguing that all authority over oil deals resided with them. For that reason, Total’s Sudan chairman made repeated trips to the capital, but never went south. It wasn’t until January that the company posted Mr. Servot to Juba to try to soothe raging anti-Total sentiment there.
White Nile, on the other hand, wasted no time. By July 2005 it had raised $12 million from private investors and hired a firm to identify the best drilling sites. Company officials fanned out across the vast state of Jonglei, where most of its block lies, to befriend powerful local chiefs and the state governor with promises of schools, job training and public-works projects.
“Total has not really been very friendly toward us,” says Mary Kiden, the south’s minister of social affairs. “But White Nile has been very attentive.”
Ms. Kiden also sits on the National Petroleum Council, a body made up of an equal number of ministers from the north and south that is supposed to resolve the White Nile spat.
FROM BAD TO WORSE
For Total, the situation on the ground has gone from bad to worse. Mr. Servot, Total’s man in Juba since January, hasn’t set foot in any part of Block B. The provincial government of Jonglei passed along word earlier this year that it would arrest anyone from Total entering the state. “We take that warning seriously,” says Mr. Servot.
Sitting in a small air-conditioned trailer he rents in a walled compound, Mr. Servot shows off an aerial photo of Total’s erstwhile base camp, built on a bend in the Nile in the early 1980s. The camp has been taken over, with Southern government approval, by a Moldovan oil company called Ascom that is doing exploration work further north. Mr. Servot notes the flag of the South Sudanese army fluttering overhead. “These guys have taken over our logistics camp,” he fumes.
Oil experts doubt White Nile has the ability to develop the site on its own. “In White Nile you’ve got a company that does not have a proven track record, the financial resources or the staff to develop a very complicated oil field, if oil is found,” says Michael Rodgers, a partner at the Washington-based oil consultancy PFC Energy, who has spent years studying Sudan’s oil fields.
It’s a charge White Nile dismisses as irrelevant. “This is a watershed moment in how the world looks at natural resources,” says Edmonds. He says if While Nile hits a large reserve, it can borrow money, join with a large operator or give the work to subcontractors.
The north and south governments have met several times in recent weeks, and there is talk of a potential resolution that could give White Nile a sizable share in the original Total consortium. Total says it has heard nothing of a potential deal and has not talked with White Nile.
Edmonds says he has no problem working alongside Total. “Why don’t they come talk to us?” he says. “There’s more than enough oil to go around.”
(Wall Street Journal)