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Controversy looms over Nile Petroleum, Glencore joint venture

July 20, 2011 (JUBA) - An MP from South Sudan’s parliament has requested that further inquiries are made as to the suitability of Glencore International - a Switzerland-based firm - to enter into a joint venture with South Sudan’s Nile Petroleum Corporation (Nilepet).

Marc Rich (AP)Marc Rich, founder of the company was - until a presidential pardon in 2001 - was wanted in the US by the Federal Bureau of Investigation’s (FBI) for massive tax fraud.

The merger, according to Mangok Kali Mangok, Nilepet’s managing director was meant to ensure that crude oil entitlements from the company and the Republic of South Sudan in general, find international markets.

However, a South Sudan MP has said that the national oils company risks being duped by entities like Glencore, with “unclear and lacking proper records.”

“We need to institute proper inquiries into such joint ventures like the one between Glencore and Nile Petroleum Corporation. As South Sudanese, we risk loosing to investors, if we do not trade professionally,” the legislator, who preferred anonymity, told Sudan Tribune on Wednesday.

Glencore’s founder, was in 1983 indicted for evading more than $48 million in taxes, and charged with 51 counts of tax fraud, as well as running illegal oil deals with Iran during the US’s 1979-1980 hostage crisis. He was pardoned controversially on Bill Clinton’s last day in office at White House.

“Some questions have still been left answered. This leaves South Sudanese wondering as to why Nile Petroleum opted to enter into a joint venture with this company [Glencore International] before tracing their background,” said the South Sudan-ruling party legislator.

Speaking from Sudan’s capital, Khartoum, Nilepet’s managing director downplayed these fears, saying his company has already done researched the company before entering the partnership.

“I cannot comment on such allegations of criminality involving Glencore International. As Nile Petroleum, we viewed the profile of this company and we were impressed. That is how we formed a joint venture,” Mangok told Sudan Tribune.

Under the deal, he added, Glencore will assist in marketing South Sudan’s crude oil, ensuring that it conforms to international standards, in addition to offering other capacity building initiatives.

But David Loro Gubek, the Energy and Mining ministry’s undersecretary said Glencore and Nilepet were simply partners in business and that the joint venture was just a “local partnership” that excluded a Memorandum of Understanding (MoU) between the two.

“Some media mistook this joint venture to be an agreement that, which was a misrepresentation. For any agreement such as a memorandum of understanding to be reached between two entities, it has to be at a ministerial level, not between companies,” Gubek told Sudan Tribune in a separate interview.

He denied reports that Glencore would be the sole company involved in marketing the new country’s crude oil, arguing that the process cannot involve only a single entity.

The joint partnership between the two, he added, was simply the outcome of cooperation among the top leaderships in these companies, citing the recent fuel crisis that hit South Sudan, where the Nilepet and Glencore jointly supplied fuel from Kenya to be used during the July 9 independence celebrations.

In March, South Sudan’s Energy and Mining ministry and Petroliam Nasional Berhad (PETRONAS), a Malaysian-owned oil and gas company signed a two-year memorandum of understanding (MoU) aimed at boosting mutual cooperation between the two parties.

The MoU, signed in Juba, South Sudan’s capital, outlined the overall principles of cooperation in the oil and gas sector between the government and the Malaysian oil giants, creating an avenue for exploiting existing business opportunities.