WWF
International, Switzerland: Unfit for purpose: Shell
consortium profiting from the riches of Russia’s Far East:
"...an oil platform is being built at the very spot where
the last 100 critically endangered Western Pacific gray
whales feed off of Sakhalin Island.":
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Burning oil-gas by the
Sakhalinneftegaz state company. Sakhalin
Island on the Sea of Okhotsk, Russian
Federation.
© WWF-Canon / Vladimir Filnov
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Map of the Sakhalin region
© WWF
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Critically endangered Gray whale
Eschrictius robustus.
© WWF-Canon
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Construction through the forest.
© Dmitry Lisitsyn / Sakhalin Environment
Watch
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Friday 25 Nov 2005
It has been a windfall year for international energy
companies, capitalizing on record high gas and oil prices.
And, with demand still high, the race to find more of these
precious non-renewable resources is on. But at what cost?
Although future exploration could help alleviate escalating
gas prices and reduce a nation’s dependence on imported oil,
many of these companies — in their quest to maximize profits
— are failing to meet their corporate and social
responsibilities to local communities and the environment,
the respective guardians and providers of these resources.
No place is this lack of responsibility more evident than in
Russia’s Far East where the Royal Dutch Shell company —
whose recent third-quarter results showed net income grow at
an outstanding 68 per cent to US$9.03 billion from US$5.37
billion a year earlier — has embarked on a multi-billion gas
and oil development project. The Shell-led project, which
includes other multi-nationals like Mitsubishi and Mitsui,
consists of three offshore platforms, offshore and onshore
pipelines, an onshore processing facility, a liquefied
natural gas facility, and an oil and gas terminal.
Known as Sakhalin II, this ambitious project will have
severe, if not irreversible environmental impacts,
particularly as the oil pipeline will cross over 1,000 wild
rivers and tributaries, many of them important to salmon
spawning. In addition, a million tons of dredging waste has
been dumped against public protest into Aniva Bay — an area
crucial to the livelihood of the island’s indigenous
community — has led the destruction of the local fishery and
other marine species like scallops. And to make matters
worse, an oil platform is being built at the very spot where
the last 100 critically endangered Western Pacific gray
whales feed off of Sakhalin Island.
Although Shell agreed to move the offshore pipeline around
the whale’s feeding area, they ignored the findings of an
independent panel of distinguished scientists that
recommended not constructing an oil platform in the
vicinity. Such an action falls short of international best
practices and adheres to a pre-determined construction
schedule with little regard to serious long-term
environmental concerns. It also shows that Shell has clearly
chosen its profits over its self-inscribed principles of
responding to potential impacts of its operations on the
environment.
By Shell’s own estimates, there is a 24 per cent chance that
there will be a major oil spill during the life of the
40-year project. This is a cause to worry. The Exxon Valdez
oil spill disaster of March 1989 in Alaska’s once pristine
Prince William Sound, which cost the oil company US$2.1
billion to clean up over three years and caused extensive
environmental damage, should be a case in point for
proceeding with extreme caution at Sakhalin. But, proceeding
with caution has not been part of the overall game plan to
get this project up and running.
Shell’s ability to pull off the US$20 billion mega-project,
which includes a cost overrun of US$10 billion, however,
relies on financing from the European Bank for
Reconstruction and Development (ERBD). This public
institution, which is mandated to support “environmentally
sound and sustainable development”, will soon determine if
the Sakahlin II project is “fit for purpose” and whether or
not the consortium has developed the appropriate assessments
and procedures to prevent adverse environmental impacts.
In May 2005, the head of the ERBD already determined that
the project was “unfit for purpose” due to Shell’s disregard
for environmental considerations. Six months on, the bank
should reach the same conclusion and decline financing until
Shell faces up to its environmental responsibilities.
This includes suspending the placement of the oil platform
pending results of next year’s whale monitoring programme
that will provide further information on the status of the
whales, as well as suspend all construction activities for
river crossings pending an independent assessment. Shell
should be required to restore degraded rivers and
tributaries and compensate local fishing communities for
loss of livelihoods as a consequence of current practices.
Finally, Shell should present an oil spill prevention
programme that meets internationally acceptable standards,
particularly in the harsh, icy conditions off the Russian
island’s coastline.
The ERBD’s decision will no doubt be a litmus test for other
banks and financial institutions to follow when it comes to
financing such questionable and poorly-managed projects.
Taking the most basic precautionary measures to avoid
irreversible environmental destruction is not only socially
responsible, but equally important to long-term profits and
a company’s reputation. Better environmental management will
truly serve investors and whales alike.
* Dr Claude Martin is
Director General of WWF International |
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