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EBRD Raps Sakhalin 2 Gas, Oil Project Over Environmental Concerns

RedNova News: EBRD Raps Sakhalin 2 Gas, Oil Project Over Environmental Concerns

“The so-called Sakhalin 2 natural gas and oil development project involving Japanese trading houses has suffered a fresh setback after the European Bank for Reconstruction and Development said the project lacks environmental awareness.”

Posted Friday 29 July 2005

Jul. 28–TOKYO — The so-called Sakhalin 2 natural gas and oil development project involving Japanese trading houses has suffered a fresh setback after the European Bank for Reconstruction and Development said the project lacks environmental awareness.

According to sources close to the matter, the EBRD has been considering funding the project but recently called on Sakhalin Energy Investment Co., the project’s operator, to improve on the lack of environment protection measures after conducting inspections at project sites off the island of Sakhalin in Russia’s Far East.

The Sakhalin 2 project, launched in 1986, began commercial oil production under the first phase in 1999 and is expected to produce 9.6 million tons of liquefied natural gas a year. Total investment is estimated at $9 billion to $10 billion.

The EBRD has found that due to inappropriate conservation measures at the construction site for land pipelines, soil flowed into nearby rivers, the sources said.

Sakhalin Energy Investment has admitted the outflow of soil at the construction site and suggested temporarily suspending construction to introduce better environmental protection measures, the sources said.

The operator is owned 55 percent by Royal Dutch/Shell Group, 25 percent by Mitsui & Co. and 20 percent by Mitsubishi Corp.

The project has already been under fierce criticism from conservation groups and international organizations of scientists.

In March, Sakhalin Energy Investment announced it had changed the planned route for a seabed pipeline to help protect a local gray whale habitat, a move in reaction to the World Wildlife Fund and other conservation groups’ protests.

As a result, shipping of LNG to Japan and other countries, which was initially scheduled to start in late 2007, is believed to have been delayed until mid-2008.

“Taking necessary measures only after problems emerge is too late,” said Shoko Murakami from nongovernmental organization Friends of the Earth Japan.

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