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Current Highlight:
Russia's Sakhalin II Project

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The European Bank for Reconstruction and Development (EBRD) and the Export Credit Agencies of the UK, US, and Japan may provide as much as USD $5B in financing for the controversial Sakhalin II oil and gas project located in the species-rich yet sensitive on and off-shore habitats at Sakhalin Island in the Russian Far East.  This financing may leverage billions of dollars more from large international private banks such as Credit Suisse First Boston. Sakhalin II is operated by the Royal Dutch Shell subsidiary Sakhalin Energy, or SEIC (non-controlling interest in which is held by Mitsui and Mitsubishi). Ian Craig is the CEO of SEIC. The main Russian NGO participating in the ECA Watch campaign and working to minimize negative impacts of Sakhalin II is Sakhalin Environment Watch (SEW).

"Investors should think carefully about backing a project that puts shareholder value above human welfare and the survival of an endangered species." -Igor Chestin, director of WWF-Russia in Feb. 2005 article "Whales May Not Survive Sakhalin Oil Operations, Panel Finds" (Environment News Service)

Photo Credit:Greenpeace Russia

* Background on Sakhalin
* News Items (All)

• News on the financing behind Sakhalin II - Including news on the ECAs ECGD, JBIC, and US ExIm, as well as the multilateral EBRD.
  
• News on the project and the environment - Including news on whales, salmon, and clean water resources.
  
• News on the project and Russia's people - Including news on Sakhalin's Indigenous Peoples of the North and their protests, as well as small landowners, working people and children.

Background on Sakhalin:

Sakhalin's waters contain some of the richest fisheries on the Pacific Rim with a salmon fishery unrivalled anywhere in Russia. It is also home to 25 marine mammal species, including 11 endangered species, most notably the critically endangered Western Pacific Gray Whale. Yet, the Sakhalin II project threatens these resources by extracting and transporting oil and gas in a marine environment with difficult climate conditions (including high seismic activity, heavy ice pack, frequent storms and fog). The island's communities, as well as local and international NGOs, voiced concern that this risky project would threaten this environment as well as the regional fishing economy.

The project operator of Sakhalin II is Sakhalin Energy Investment Company (Sakhalin Energy, or SEIC), consisting of multinational corporations with Shell as the lead operator (55% shareholdings); Mitsui subsidiary (25%) and a Mitsubishi subsidiary (20%).

Sakhalin II poses many threats. It:

• Imperils the most critically endangered gray whale population in the world and 11 other endangered species;
• Threatens some of the few healthy salmon runs left in the world with over 400 kilometers of proposed on-shore pipeline trenched directly through salmon streams;
• Envisages the world's largest liquid natural gas facility and immense associated greenhouse gas emissions;
• Applies environmental standards far weaker than global best practices;
• Skirts tax obligations by operating from a tax shelter in the Bahamas;
• Promotes an unsustainable development path for Russia, which will receive billions of dollars less in revenues from the project than was anticipated; and
• Weakens the regional local fishing economy through pollution impacts.

Whales & oil activities: click on the map above for a closer look (legend in Russian)

Despite repeated requests to Sakhalin Energy to improve its oil spill prevention and response system, the company has not taken any significant action to do so. Independent experts from Alaska and the Shetland Islands issued a report as early as 1999 -- called "Sakhalin's Oil: Doing It Right" -- warning that the current oil spill prevention and response measures leave the coastlines of Sakhalin and Hokkaido vulnerable to a catastrophic spill. The report recommended 78 specific measures -- including such basic recommendations as mandatory tanker routes, increased monitoring of tanker traffic, notifications to fishing vessels if a tanker is in the area, and increased spill response equipment and improved access to the shoreline where it would be deployed -- but these have not been acted upon by Sakhalin Energy. As a result, Sakhalin and Hokkaido remain vulnerable to a catastrophic spill, made even more likely by increased tanker traffic foreseen under phase II of the project. As reported in today's Wall Street Journal, "Spill response in Canada, Norway and Britain is generally far more comprehensive," and in Alaska, following the disastrous Exxon Valdez spill, "state and U.S. officials ordered the industry to set up a massive spill-response system for Prince William Sound." Sakhalin Energy's lack of action to increase its oil spill prevention and response measures -- despite repeated requests from the public to do so -- further underscores its lack of attention to environmental standards.

The demands of NGOs to Sakhalin Energy (SEIC), Sakhalin II project operator:

1. Gray whale protection:
   - Relocation of planned site of new PA-B platform far enough away from Western Gray Whales to ensure no negative impacts;
   - Avoidance of any seabed disturbance, any time of year, in whale feeding area;
   
   
2. Pipeline impact on salmon: cross all salmon spawning streams via diagonal drilling underneath or bridges;
   
   
3. Much more aggressive oil spill prevention measures, especially along the tanker routes out of Prigorodnoye;
   
   
4. A commitment to zero waste discharge - 100 percent reinjection, including water-based muds; in particular minimization of impact on the rich Aniva Bay fisheries including cessation of all drilling waste dumping in Aniva Bay;
   
   
5. Better public participation practices, including the release of information and taking public concerns into serious consideration.

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More Useful Links on Sakhalin II:

Case Study: Sakhalin II Excerpted from Leaking Operations: Environmental Consequences of World Bank and EBRD Involvement in the Russian Oil Sector, by Irina Baranova, CEE Bankwatch Network 2001. NOTE: For the full publication (available in English and Russian), please go to www.bankwatch.org/overview/mstaff.html and contact the national coordinator in your country.

Time to improve Sakhalin oil spill prevention and response measures February 21, 2000 "Given the economic and environmental value of the Sea of Okhotsk, it is not surprising that many in Russia and Japan are concerned about pollution. Yet government authorities, international companies and public financial institutions have focused on speeding ahead with efforts to develop Sakhalin Island's oil and gas fields, while little attention has been paid to improving the island's capacity to prevent and respond to oil spills."

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News on Sakhalin II:

• Jump to News on the financing behind Sakhalin II - Including news on the ECAs ECGD, JBIC, and US ExIm, as well as the multilateral EBRD.
  
• Jump to News on the project and the environment - Including news on whales, salmon, and clean water resources.
  
• Jump to News on the project and Russia's people - Including news on Sakhalin's Indigenous Peoples of the North and their protests, as well as small landowners, working people and children.

General News on Sakhalin II:

WWF & Corner House Legal challenge against ECGD on Sakhalin 2 Aug.15, 2007

EBRD will not help fund Gazprom-led Sakhalin-2 energy project Aug.7, 2007

ECAs warned not to support ongoing Sakhalin environmental problems June 27, 2007

Belgian ECA concerned about reputational risk over Sakhalin II cover Nov. 28, 2006

Russia says damages in Shell Sakhalin II project could amount to US$15 billion Nov. 14, 2007

EBRD urged by WWF to not fund controversial Sakhalin project Sept. 13, 2006

A Sakhalin Mayor Says Shell Unit Offered Cash Payment Oct. 27, 2005 (Dow Jones Newswire)

Sakhalin cost overruns reduce Shell assets July 27, 2005

Concrete Platform Begins Journey to Sakhalin II Field June 15, 2005

Ian Craig named CEO of Sakhalin Energy May 2004

Analysis of Seismic Risks March 2, 2004 An independent report released by five Russian, Japanese and US environmental organizations which exposes deep cracks in the seismic risk analysis conducted by Shell/SEIC for Sakhalin II. The report documents that Sakhalin II seismic examinations present incomplete, inaccurate and contradictory information, understates seismic risks, fail to provide documentation of site-specific risks at individual fault crossings, and base their findings on hazards to people, but not to the environment.

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For more information, contact the ECA Watch Facilitator.

ECA Watch Campaign Member Links:

Sakhalin Environment Watch, Dmitry Lisitsyn- www.sakhalin.environment.ru/en/
Pacific Environment, Doug Norlen - www.pacificenvironment.org
CEE Bankwatch Network, Petr Hlobil - www.bankwatch.org
Friends of the Earth - Japan, Naomi Kanzaki - www.foej