EBRD Calls Off Oil Aid to Controversial Shell/Gazprom Sakhalin II Project
Graham Saul
funders, say campaigners
(January 15, 2007)
CEE Bankwatch Network, WWF Russia, Pacific Environment, Sakhalin
Environment Watch (SEW)
International groups working on the Sakhalin II campaign today called on
other potential funders to uphold their environmental policies on the
controversial project and to follow the European Bank for Reconstruction
and Development (EBRD), which finally confirmed on Thursday this week
that it will not provide a USD 300 million loan for the project.
The export credit agencies of Japan, the UK and US, and a range of
private banks including ABN Amro, Royal Bank of Scotland, Mizuho still
remain as potential financiers of up to USD 10 billion support for the
Sakhalin II project, now under the overall control of Gazprom, but with
operational control thought still to rest with the former consortium
leaders Shell.
While EBRD claims its decision was based on changes in the project´s
ownership structure, in the end it was also unable to sign off on the
project due to its wide-ranging non-compliance both with Russian law and
the bank´s own environmental standards. With the project almost complete
and thus terminally flawed in various key respects such as onshore
pipeline design technology, campaigners say it will now be impossible
for other potential lenders to get involved without breaking their own
lending guidelines or unless they suddenly watered down those guidelines.
Dimitry Lisitysn, who lives on Sakhalin Island and is the head of
Sakhalin Environment Watch, said: "Environmental groups agree with EBRD
that its value added was decreasing as the project comes closer to
completion. We witnessed EBRD´s environmental leverage diminishing last
year when the project´s negative impacts on the ground overtook Sakhalin
Energy´s rhetoric to the contrary. Sakhalin Environment Watch will
continue its active project monitoring and we will use all emerging
opportunities to minimise the environmental impact and risks."
Igor Chestin, Director of WWF Russia, said: "Today the international NGO
coalition has sent a letter to Gazprom requesting the commencement of a
constructive dialogue that would take into consideration our demands
regarding Sakhalin II´s compliance with national legislation and
international environmental and social standards. These are the same
demands that we asked of Sakhalin Energy under the project´s previous
ownership."
The EBRD´s decision on Sakhalin II had been expected for several weeks
following the announcement that Gazprom had taken majority control of
the project. Yet EBRD´s environmental credibility would have suffered
tremendously if it financed Sakhalin II when the host government,
national and international environmental groups, and the EBRD´s own
Environment Department, had documented broad and fundamental violations
of its policies.
Petr Hlobil, Campaigns coordinator of CEE Bankwatch Network, said: "The
EBRD´s president talks about balancing the bank´s business nose with its
environmental and social responsibility. Has it not filtered through to
EBRD corridors yet that you can do away with this balancing act by
saying NO altogether to the billion dollar profit-making giants in the
extractives sector? Five years and countless hours of EBRD staff time
have been devoted to trying to sort out such a badly conceived project.
It is inconceivable that 20 renewable energy projects would pose the
EBRD as many problems as Shell´s nightmare on Sakhalin has."
For more information
Dimitry Lisitysn
Sakhalin Environment Watch
Sakhalin Island, Russia
Email: sakhalinwatch at yandex.ru
Petr Hlobil
CEE Bankwatch Network
Czech Republic
Tel: +420 603 154 349
Doug Norlen
Pacific Environment
USA
Tel: +1 (202) 465-1650
EBRD BACKGROUND:
>
>
> 11 January 2007
> EBRD no longer considers current financing package for Sakhalin II
> Bank is open to discussions with restructured Sakhalin Energy
> Following a significant change in the ownership of the Sakhalin
Energy Investment Company, the
> EBRD will no longer consider the financing package of the Sakhalin II
project that it had been
> considering for the past five years. If the new group of shareholders
were to request it and make a
> case that the project could be eligible for EBRD investment, the Bank
could consider financing in
> the future. The closer the project comes to completion, however, the
less value EBRD financing
> could add.
> With the recent acquisition by the Russian company Gazprom of a
majority stake in Sakhalin
> Energy, there has been a significant material change to the project
which the EBRD had been
> considering. The shareholders and the structure of the company have
changed and the approach
> to financing has yet to be decided by the new shareholders, meaning
that it is not feasible for the
> EBRD to pursue the current project.
> In 2001, the shareholders of Sakhalin Energy -- Shell, Mitsui and
Mitsubishi -- asked the EBRD to
> partially finance Sakhalin II, which will produce offshore gas and
oil from Russia´s far eastern
> coast. Much collaborative work was undertaken with Sakhalin Energy to
ensure the project could
> meet the expectations - especially environmental standards - of EBRD
financing, but the Bank
> had not taken any decision on whether to make the investment.
> The EBRD declared a year ago that the project met sufficient
requirements for the Bank to seek
> the views of the public and conducted an intensive consultation
process in Russia, Japan and
> London. For the past year, pending a decision on whether to finance,
the EBRD has continued to
> monitor construction and encouraged the adoption of long-term
safeguards, especially related to
> environmental and social aspects of the $20 billion project.
> The EBRD saw its potential role in Sakhalin II as a financial partner
to encourage the highest
> standards of environmental protection in the design and construction
phases of the project, which
> includes offshore drilling and underwater pipelines to Sakhalin
Island, land pipelines for oil and
> gas, a liquefied natural gas plant and oil and gas export terminals.
> Through its engagement in the development of the project, the EBRD
has helped to introduce
> commitments to consultation, transparency and treatment of indigenous
people. The EBRD has
> worked with Sakhalin Energy on many enhancements during the
construction phase: Sakhalin
> Energy rerouted pipelines to accommodate the rare Western Gray whale
that feeds in the region;
> a panel of recognised whale experts was established to monitor and
advise on operations;
> significant improvements were introduced to the strategy for on-land
pipeline construction,
> especially the environmentally sensitive crossings of some 1000
rivers; and Sakhalin Energy
> adopted a standard-setting plan for treatment of indigenous peoples
as well as transparency and
> consultation.
> The EBRD made about one-third of its investments last year in Russia,
more than any other
> country among the 29 countries where the Bank operates. Russia´s
share of EBRD investments is
> forecast to continue to increase in 2007.
>
> Press contact:
> Anthony Williams, Head of Media Relations - Tel: +44 20 7338 6997;
E-mail: will...@ebrd.com
> http://www.ebrd.com/new/pressrel/2007/201sakh11jan.htm