Reuters: Shell's Sakhalin-2 financing package seen delayed: “LONDON: Royal Dutch Shell Plc looks set to miss a target to agree a $5bn financing package for its Sakhalin-2 gas project by the end of the year…”: Wednesday 19 October 2005

LONDON: Royal Dutch Shell Plc looks set to miss a target to agree a $5bn financing package for its Sakhalin-2 gas project by the end of the year, due to delays in securing a loan from the European Bank for Reconstruction and Development (EBRD).

EBRD spokeswoman Vanora Bennett said on Tuesday the lender had not yet decided when it will begin a 120-day public consultation period on its part of the package, suggesting overall approval will be in early 2006 at the earliest.

The EBRD is concerned that the project may not meet its environmental policies.

Shell said in June it had scheduled to close financing by year end.

Shell spokesman Andy Corrigan said the timing on the loan was a matter for the EBRD and declined to comment on whether Shell's schedule had been altered.

Analysts said the Anglo-Dutch firm and its partners on the project had other financing options but the potential delay could be the latest in a series of problems for Shell's largest single oil and gas project.

In July, the world's third-largest oil firm by market value shocked investors when it upped its estimate of the expected cost of Sakhalin-2 to $20 billion from $10 billion and said oil and gas production would be delayed.

The Shell-led Sakhalin-2 consortium has also been forced to reroute an oil pipeline because of concerns about the impact on the rare grey whale, which the consortium describes as "critically endangered".

The EBRD is considering whether to lend a small portion of the $5bn package but other lenders' participation hinges on the EBRD's involvement.

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