Sakhalin II Update:
Project
Financing
The Sakhalin II project does not meet the environmental guidelines of the World Bank and the International Finance Corporation. Yet it is financed by the European Board for Reconstruction and Development (EBRD), the ECAs of the US, the UK, and Japan, and private banks. Environmental, indigenous, commercial and community groups are campaigning to pressure the sponsors to withdraw their support.
Sakhalin II is operated by the Royal Dutch Shell subsidiary SEIC (non-controlling interest in which is held by Mitsui and Mitsubishi). Ian Craig is the CEO of SEIC.
Read About:
1) EBRD Financing
2) ECA Financing
3) Other Government Financing
4) Private Financing
/ Contracts
Important Background Documents on Sakhalin II Project Finance
 Two-page briefing for EBRD annual meeting [PDF] May 2005 by CEE Bankwatch
The Sakhalin II PSA, A Production "Non-Sharing" Agreement: An Analysis of Revenue Distribution [PDF] November 2004 by Economist Dr. Ian Rutledge.
An independent analysis of the Sakhalin II Production Sharing Agreement (PSA) by a leading energy economist documents that the contract will provide far fewer revenues to the Russian Federation than under a standard PSA. The analysis finds that the Sakhalin II PSA represents a "major departure from standard PSA terms worldwide, and that [t]he benefits which flow to the Russian party fall a long way short of those which would have been received had a standard type PSA been used [in which] the Russian party would receive 45% more economic rent.”
EBRD Financing
Industrial Accident Exposed [Word Doc] February 24, 2004 letter by Sakhalin Environment Watch to EBRD President Jean Lemierre regarding a industrial accident on the Sakhalin II project LNG site, December 22, 2003. See also January 15, 2004, newspaper article in Svobodniy Sakhalin.
Preliminary Evaluation of Conformity [PDF] January 2004 Sakhalin II, Phase 2 and the Environmental Standards of the World Bank (WB) and International Finance Corporation (IFC).
ECA Financing
Environmental Groups Develop New Ways to Air Grievances - Financing, Not Pipelines, Becomes the Latest Target October 11, 2005 (Wall Street Journal- Europe) — This article features Sakhalin Environment Watch and its work on pressuring Sakhalin II financiers, including ECAs.
Sakhalin cost overruns reduce Shell's assets July 27, 2005 (Eurasia Daily Monitor) — A staggering USD $10B cost overrun— double initial estimates— plus a delay in the first LNG shipment from the end of 2007 to summer 2008 have significantly reduced the value of Shell's assets on Sakhalin. US, UK and Japanese ECAs are funding major shares of the project.
Sakhalin Energy, JBIC to Sign Sakhalin II Finance Agreement December 17, 2004
Seeking ECA Support, Shell’s Sakhalin II Project Threatens Whale with Extinction August 3, 2004
Export Credit Agencies to Fund Pipelines in Russia September 5, 2003
Letter from NGOs to President of Overseas Private Investment Corproation, a US ECA regarding the Sakhalin II Project September 4, 2002 "...the oil and gas projects off-shore of Sakhalin Island in the Russian Far East are proving to be environmental and developmental catastrophes. As world leaders concerned about sustainable development conclude meetings at the Earth Summit in South Africa, we find it disconcerting that the US Overseas Private Investment Corporation (OPIC) continues support for the dubious and risky Sakhalin II project."
Letter from NGOs to Export-Import Bank of the United States regarding Sakhalin II Project September 4, 2002 * footnotes may be viewed on the pdf file
Joint Letter from 18 NGOs to OPIC regarding OPIC's consideration to support Sakhalin II and background memo: Broken Commitments: Sakhalin II and Ongoing Environmental, Social and Economic Problems December 10, 2001 - The threat of impacts from a potential catastrophic oil spill associated with drilling and transport of oil, and of "normal" chronic daily discharges from the operation, are an unacceptably high risk to this environment and economy. The fact that Sakhalin II is in an area of very high seismic activity increases these risks still further.
Other Government Financing
Japan to Receive Half of Sakhalin II LNG May 31, 2005
Sakhalin Governor goes to Moscow for Bigger Share of Oil Revenues March 15, 2005
Shell's Sakhalin Energy Audited for Back Taxes; USD $2.5B Damages to Russia Alleged February 12, 2005
Private Financing / Contracts
Gazprom Announces New 25% Share in Sakhalin II June 10, 2005
Toho Gas to Buy Sakhalin II LNG June 7, 2005
Russian Government Supports Gazprom Stake in Sakhalin II April 10, 2005
Shell Denies Sakhalin Swap Deal March 14, 2005
Sakhalin II Gas 70 Percent Sold Out February 16, 2005
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.foejapan.org
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