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EBRD freezes Shell Sakhalin loan

The Observer (UK): EBRD freezes Shell Sakhalin loan

Nick Mathiason

Sunday June 19, 2005

The European Bank for Reconstruction and Development is refusing to fund Shell’s vital $12 billion Sakhalin-2 oil and gas project off the east coast of Russia until problems with the environmental impact of the pipeline’s construction are resolved.

The news is a serious blow to Shell, which needs to finalise funding quickly so it can begin the building of liquefied natural gas platforms and terminals. Sakhalin-2 will generate $45bn worth of energy and is vital for the future of the embattled firm.

In March, The Observer published pictures that appeared to show sub-contractors installing the world’s most expensive pipeline were causing waste from the project to slide into freshwater salmon spawning grounds, putting the island’s fishing industry at risk. Shell was earlier forced to change the route of a pipeline to ensure the survival of a rare breed of whales.

Privately the EBRD, which has visited Sakhalin, is shocked at how construction appears to be getting out of control. Its president, Jean Lemierre, is due to meet with Shell chief executive Jeroen van der Veer in two weeks’ time. A spokesman for the EBRD, said: ‘The project is not at this stage … in material compliance with our policy and the company’s commitments.’

The EBRD said that problems could be resolved but if not, other banks may follow its lead and refuse to issue loans for the project.,,1509544,00.html

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