Problem

The problem that Talisman Energy Inc. is facing are the risks that they will face coming into Iraq, and dealing with the Kurdistan Regional Government. Talisman Energy Inc. will have to deal with KRG not knowing how they will act with the money that Talisman Energy Inc. will give them.

Analysis

The first thing that worries Talisman Energy Inc. is that they don’t know if KRG will use the money on economic development or to buy weapons. If KRG uses the money to build the economy then this will make Talisman Energy Inc. look like they helping a good cause which will help bring up the value of their stocks and make them grow. But if KRG uses the money for illegal purposes such as buy weapons. This news will make Talisman Energy Inc. look like if they support violence in the Middle East, which will bring uproar in the region. This will also make Talisman Energy Inc. look like they support Saddam Hussein and his weapons of mass destruction. If it actually came to pass that KRG was found actually spending money on weapons of mass destruction. Talisman Energy Inc. stocks would drop significantly and ruin the reputation of Talisman Energy Inc. Although Baghdad gave complete autonomy to KRG, they might still need to overrule these purchases of weapons. For other international NGO communities they will need to come in to stop KRG from continuing to purchase weapons and will ask KRG to safely destroy these weapons. This scandal would really damage the reputation of Talisman Energy Inc. Krg charges a really expensive license fee for Talisman Energy Inc. and any other oil and gas company to drill on their land. Another risk that may be presented upon Talisman Energy Inc. is if the government of Baghdad contests the license that Talisman Energy Inc. bought to drill in the Kurdistan Region.
Not to mention the experience that Talisman Energy Inc. had faced in Sudan. Where NGOs blamed Talisman Energy Inc. for fueling the civil war in Sudan by their license fees and any other type of indirect funding. The government in Sudan used the money to buy weapons. NGOs worked on helping Talisman Energy Inc. to stop indirectly funding the Sudan Government. Throughout this civil war about 2 million civilians died.
Talisman Energy Inc. started to try to influence the government to stop this human rights abuse. Although Talisman Energy Inc. was becoming very prosperous throughout their time in Sudan reaching revenue 4 times what was expected they had to leave the country because of this war and the lawsuits from the Presbyterian Church who was suing them because of aiding the government of Sudan’s human rights violations.

Alternatives

The first alternative can be for Talisman Energy Inc. to go over with KRG how the money for the licensee will be allocate din their budget. If everything comes out fair, then they can get a lawyer to sign off the agreement. Otherwise if Talisman Energy Inc. doesn’t know how the money will be used once with KRG then anything that KRG does with the money can have Talisman Energy Inc. held liable for their reputation. Since their experience in Sudan, I don’t believe they are willing to relive those hardships. For them to avoid that, they will have to take initiative to go over the allocations of the budget thoroughly prior to signing a contract. If KRG doesn’t approve of this then there may be a bigger reason for Talisman Energy Inc. not to enter Iraq.
The other alternative that we may consider would be to review the agreement that KRG and Baghdad have together to make sure that Baghdad wont come back on their word with KRG, because if so that would meddle in the business of Talisman Energy Inc. Which may cause big problems with the company and issues that their shareholders may not approve of. If that is the case, then Talisman Energy Inc. may find their stocks plummeting. In this case, I believe that Talisman Energy Inc. should go over the terms and conditions of this agreement between KRG and Baghdad. If any loopholes were found in this document then this may cause some concern in the future.

Recommendations

My recommendation for Talisman Energy Inc. to go through with would be the first alternative. If you look back at the situation in Sudan we see that the issue arose around the fact that Talisman Energy Inc. was seen as aiding the government of Sudan to violate human right laws with the weapons of mass destruction that the government was buying to fuel this civil war. For Talisman Energy Inc. to avoid this problem again, they should set an agreement with KRG to make sure that all the money that Talisman Energy Inc. is paying for their license not to be used in any illegal manner, because if KRG doesn’t comply with the agreement then Talisman Energy Inc. shouldn’t even start doing business in Iraq because it would a great risk that may ruin their reputation. Not only that but also kill many innocent civilians like in Sudan. No company would like to be associated with blood shed.