Financial Times: EBRD clears way for Shell's Sakhalin-2: “Jean Lemierre, EBRD president, stressed that the bank had not made a decision to finance the project. However, environment lobby groups were incensed about the move, accusing the bank of "caving in to Shell pressure": Thursday 15 December 2005
By Thomas Catan
Published: December 15 2005
Royal Dutch Shell's top Russian project cleared a key hurdle yesterday when the European Bank for Reconstruction and Development, which is providing part of the financing for the $20bn (£11.3bn) plan, declared its environmental case "fit" for public consultation.
Environmentalists have rounded on the Sakhalin-2 oil and gas project off the eastern coast of Russia, saying it threatens the local whale population and will harm the environment. They have lobbied the EBRD hard.
The EBRD had said documentation was not adequate to proceed with the project's approval process. Now, after work with Shell and the project's Japanese partners, the bank said the documentation was in good enough shape to put to a 120-day public consultation.
Jean Lemierre, EBRD president, stressed that the bank had not made a decision to finance the project.
However, environment lobby groups were incensed about the move, accusing the bank of "caving in to Shell pressure".
"This is a crucial determinant of whether the EBRD is minded to move forward on the project," said Doug Norlen, finance programme director at Pacific Environment, the green lobby group. "It marks a serious blow to EBRD's environmental credibility."
Sakhalin Energy, the operator of the project, welcomed the decision yesterday, hailing it as "a significant milestone". The company is 55 per cent owned by Shell; Mitsui and Mitsubishi of Japan own the rest.
Ian Craig, chief executive of Sakhalin Energy, said: "I am pleased with EBRD's announcement, which reflects the rigorous environmental and social standards adopted by the company."
The EBRD had been asked to provide a relatively small part of the financing being sought for the project, in the order of €200m to €300m (£202m), said Mr Lemierre.
However, a refusal by the publicly owned bank to approve the loan would send a signal to private-sector lenders and hurt the project's image.
The cost of the Sakhalin-2 project, which is more than 60 per cent complete, has doubled to $20bn due to a range of factors, including the rising cost of materials and plans the company now says were too optimistic.
Shell has changed the route of an offshore pipeline to avoid a whale feeding ground and changed the way it lays an onshore pipeline across rivers because of concerns that it could disrupt salmon spawning.
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