Talisman Energy INC. : The Decision to Enter Iraq I. Introduction Any company that decides to expand internationally should consider many complexities that it might face. Because of the differences in political system, culture, surrounding environment, and many other factors, there might be great barriers for a firm to expand internationally. The CEO of Talisman Energy Inc and senior executive team have to convince the board of directors to enter Kurdistan region of Iraq.
After Talisman’s scandal in Sudan, taking any other step into an unstable region carries a great risk. II. The Problems 1. Talisman Energy Inc. started as a small independent oil company which needed to grow and expand internationally since that North America offered only limited growth potentials. 2. Talisman Energy Inc. has suffered a great loss not only financially but also the company’s reputation was affected after NGOs accused Talisman of fueling the civil war in Sudan. Some of the major investors threatened to sell their shares if Talisman didn’t leave Sudan. 3.
The price of oil reached 130$ per barrel, while the world demanded for oil, oil companies had to enter sensitive environments and countries to search for oil. Talisman decided to enter Kurdistan of Iraq as it is an oil rich region. 4. Kurdistan has been trying to separate from the rest of Iraq for many years, but they couldn’t do so because they were fought by Saddam Hussain and his troops. Now, they won’t miss any opportunity to have their independence. 5. Iraq is still an unstable country with all what it went through during the war with Iran and the US invasion. III.
The Suggested Solutions Since that Talisman is looking for an oil-rich regions, and found that Kurdistan is a good place to invest they should take some steps to avoid any future conflicts and minimize the risks. These steps are as follows: Talisman should be very transparent about where their money is going. They have to pay 220$ million to the Kurdistan’s government, but they should announce where the money is going and investigate if this money might be used to fuel civil wars in Iraq. Talisman cannot take the risk and face another scandal like what happened in Sudan.
Talisman should investigate about how independent Kurdistan is from the rest of Iraq, if there is any singe of conflict between Kurdistan and the government of Iraq, Talisman then should clear it out with the Iraqi government. It is as I mentioned an unstable region, so there is a great chance of conflicts. Talisman should clear out how the shares after oil discovery will be divided, since that they are not sure of finding oil or not, there might be some conflicts after the oil discovery, simply because oil is demanded all over the world, so the Iraqi government might change it’s mind and decide to get its share of the profit.
Talisman should use the media to their side before any other conflict appears. There should be some meetings with NGOs to clear out Talismans policy and intentions in entering Iraq. There has to be a communication between Talisman and the NGOs to make sure that the company is away from funding any civil wars. That way, shareholders will feel even more comfortable, and the company will not risk its reputation. V. Implementation of the Solutions (1) Talisman should start meeting with NGO’s before they enter Iraq, this way the company will be clear with the rest of the world about their future moves. 2) The investigation about the situation between Kurdistan and the Iraqi government should begin earlier and continue even after they enter Iraq, this way Talisman will be aware of the situation and be prepared for any future conflict. (3) After Talisman enters Iraq, there should be more meeting and consultations with NGO’s to discuss the situation and to make the media aware of the company’s activity in Kurdistan and that it is not funding any civil wars.
All in all, entering international markets carries many risks, actually this fact applies to any change in the world, and changes carry risk and opportunities. An organization that decides to go abroad has to study all risks and be prepared to face any conflict. Talisman is facing a great risk in entering Iraq, but the growth potentials are very high if things work out. The company should be prepared with strategies to minimize the risks.