FINANCIAL TIMES: Shell re-routes pipeline for sake of whales: “Royal Dutch/Shell has been forced to re-route a pipeline on its $12bn Sakhalin 2 project in eastern Russia because it threatened the survival of the western grey whale.” (ShellNews.net) 30 March 05
By James Boxell, FT.com, Mar 30 2005 16:5
Royal Dutch/Shell has been forced to re-route a pipeline on its $12bn Sakhalin 2 project in eastern Russia because it threatened the survival of the western grey whale.
The Anglo-Dutch energy group halted building work on the offshore pipeline last year to allow for studies into its environmental impact. Shell's original route for the pipeline, which could eventually pump 140,000 barrels of oil a day, crossed the feeding grounds of the whale. Only about 100 western grey whales are thought to remain in existence.
The Sakhalin 2 project, which also includes one of the world's biggest liquefied natural gas developments, has been criticised by Russian state auditors because of cost overruns believed to be at least $2bn. Sakhalin 2 is crucial to Shell as it looks to recover from last year's scandal regarding overbooking of reserves.
Ian Craig, chief executive of Sakhalin Energy, the venture set up by Shell to run the project, said yesterday that the pipeline delay had contributed to overruns but was "not a key driver". Shell blames exchange rate effects and rising steel prices for the ballooning costs. "We are only talking about 70km or 80km of pipeline in an overall project with 1,000km of pipeline," Mr Craig said.
The new pipeline - 20km south of Shell's preferred route - needed approval from the Russian authorities but remained on schedule to start producing oil by the end of next year.
Environmental campaigners have called on a consortium of public lenders - including the European Bank for Reconstruction and Development, the Japan Bank for International Co-operation and the US government's Overseas Private Investment Corporation - to refuse a $5bn loan needed to complete Sakhalin 2.
The EBRD, which lent money for the first phase of the project, said yesterday it would take into account the new pipeline route but would not decide on the loan until after a 120-day public consultation.
Sakhalin 2 will produce 9.6m tonnes of liquefied gas each year, extracted from fields off the coast of Sakhalin Island. Roughly 70 per cent of this capacity has already been sold to Asian nations such as Korea and Japan.
Shell is in talks with Gazprom to decide whether the state-owned Russian gas monopoly takes a stake in the project. Gazprom is eager to get involved in the global LNG market.
Shell owns 55 per cent of the Sakhalin 2 project, while Japan's Mitsui owns 25 per cent and Mitsubishi 20 per cent.
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