International Herald Tribune: Shell's Sakhalin oil project should be reined in: “It also shows that Shell has clearly chosen profits over its own proclaimed principles..": THURSDAY, DECEMBER 1, 2005
Claude Martin
GLAND, Switzerland: It has been a windfall year for international energy companies, and with ever-growing demand for gas and oil, the race to find more of these resources is on. But at what cost? In their quest to maximize profits, many companies are failing to meet their corporate and social responsibilities to local communities and the environment.
Nowhere is this lack of responsibility more evident than in Russia's Far East, where Royal Dutch/Shell is leading an ambitious multibillion-dollar gas and oil development project on Sakhalin Island. The project, which also includes other multinationals 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 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, despite public protests, a million tons of dredging waste has already been dumped into Aniva Bay - an area crucial to the livelihood of the island's indigenous community - and has led to the destruction of the local fishery. To make matters worse, an oil platform is being built at the very spot off Sakhalin where the last 100 critically endangered Western Pacific gray whales feed.
While Shell agreed to move the offshore pipeline around the whales' feeding area, it ignored the findings of an independent panel of distinguished scientists that recommended not constructing an oil platform in the vicinity. What Shell is doing falls short of international best practices and adheres to a predetermined construction schedule with little regard to serious long-term environmental concerns. It also shows that Shell has clearly chosen profits over its own proclaimed principles of responding to its operations' potential impacts on the environment.
By Shell's own estimates, there is a 24 percent chance that there will be a major oil spill during the life of the 40-year project. This is cause for worry. The Exxon Valdez oil spill disaster of March 1989 in Alaska's once pristine Prince William Sound, which cost the oil company $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 $20 billion megaproject, however, relies on financing from the European Bank for Reconstruction and Development. 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 bank already determined that the project was "unfit for purpose" because of 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.
These include suspending the placement of the oil platform pending results of next year's whale monitoring program, which will provide further information on the animals' status, and suspending 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 program that meets internationally acceptable standards, particularly in the harsh, icy conditions off Sakhalin's coastline.
The bank'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.
(Claude Martin is director general of WWF International, the wildlife protection organization.)
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