ShellNews.net: PROTECTING THE LIVING ENVIRONMENT OF THE PACIFIC RIM: (CHAPTER ONE): "Since 1994, Shell Oil has been spearheading an oil and gas extraction project off the shore of Sakhalin Island, a Russian Island north of Japan. This development will impact the critically endangered Western Pacific Grey Whale...": Posted Wednesday 12 October 2005: 09.30pm EDT

FIRST CHAPTER OF THREE

PAGE 1: Sakhalin, Oil and the Brink of Extinction

This compilation of information concerning protecting the living environment of the Pacific Rim has been carried out by an important contributor who prefers to remain nameless.

Sakhalin, Oil and the Brink of Extinction (http://www.pacificenvironment.org/russia/sakhalin.htm) 

Since 1994, Shell Oil has been spearheading an oil and gas extraction project off the shore of Sakhalin Island, a Russian Island north of Japan. This development will impact the critically endangered Western Pacific Grey Whale, of which there are just over 100 remaining; it will wreck the island's rich marine environment; and a major spill could potentially destroy the livelihoods of tens of thousands of fishermen from Russia and Japan.

Now Shell, together with Mitsubishi and Mitsui, are expanding the project off-shore and on-land at Sakhalin Island, with potential support of public money through international financial institutions including the European Bank for Reconstruction and Development and the Export Credit Agencies of the U.K., U.S. and Japan. They are planning to build:

• Two new off-shore oil and gas platforms and undersea pipelines to shore, negatively impacting the migrating and only feeding habitat of the Western Gray Whale;
• 800 kilometers of buried oil and gas pipelines in one of the most seismically active regions in the world. These pipelines would trench through over 1,000 watercourses (rivers, streams, waterways), degrading wild salmon spawning habitat;
• Construction and operation of one of the world's largest liquid natural gas facilities and oil export terminal, dumping tons of waste into Aniva Bay;
• Transportation (by ships and pipelines) of large volumes of oil, putting the Sea of Okhotsk and the Sea of Japan at risk of a large oil spill, which could easily reach the shores of Japan.

Project History and Description

In 1994, Shell, Mitsubishi and Mitsui established Sakhalin Energy Investment Company, registered in Bermuda. Shell signed what was called a "Production Sharing Agreement" (PSA) with the Russian government, which established the distribution of financial benefits of the project between the company and the Russian government. This agreement ended up leaving little in the way of economic benefits to the Russian government, and it limits what Russian environmental laws are applicable to the project.

A recent independent study shows that the terms of PSA represent a "major departure from standard PSA terms worldwide," and the study documents 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." The project was named "Sakhalin II." (Sakhalin I is a similar project operated by ExxonMobil.)

In 1998, Shell began Phase 1 of the Sakhalin II project, with $116 million of financing each from the U.S.' Overseas Private Investment Corporation (OPIC), the European Bank for Reconstruction and Development (EBRD), and Japan Bank for International Cooperation (JBIC). This involved the placement of a large offshore oil drilling platform off the northwest coast of Sakhalin and tanker export. The Environmental Impact Assessment for the project was flawed, as Shell refused to respect Russian law and release information about the project. Since the construction of the platform, locals have reported a reduction in both the quality and the quantity of saffron cod fishing, an important part of the local diet.

Now Shell is planning to expand the operation to Phase 2. This will include the construction of two new oil and gas platforms, two pipelines carrying oil and gas the 800 km length of the island, the construction of a liquid natural gas (LNG) production plant and LNG terminal at the south end of the island. Shell is currently negotiating with the EBRD, US Export-Import Bank, and JBIC to get a loan for this second phase. The company refuses to have any meaningful dialogue with the affected people on the island about the need for changes in the project. This "bad neighbor" policy, and the lack of economic benefits to most Sakhalin Islanders, has created increasing frustration across the island, with many calling for a complete stop to the project. 

http://www.bankwatch.org/publications/policy_letters/2004/sakhalin-moratorium_letter.pdf

ShellNews.net: PROTECTING THE LIVING ENVIRONMENT OF THE PACIFIC RIM: CHAPTER TWO: Posted Wednesday 12 October 2005: 09.30pm EDT: READ

ShellNews.net: PROTECTING THE LIVING ENVIRONMENT OF THE PACIFIC RIM: CHAPTER THREE: Posted Wednesday 12 October 2005: 09.30pm EDT: READ

Click here to return to ShellNews.net HOME PAGE