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RIA Novosti (Russia): EBRD mulls financing for Far East energy project

12:06 | 02/ 02/ 2006
VLADIVOSTOK, February 2 (RIA Novosti, Veronika Perminova) – The European Bank of Reconstruction and Development will reach a decision within two months on crediting an energy project off the island of Sakhalin in Russia's Far East that has come under attack from environmentalists, the local administration said Thursday.
The Sakhalin Region administration said EBRD Secretary General Horst Reichenbach met with regional governor Ivan Malakhov in the regional center of Yuzhno-Sakhalinsk, and that the bank was considering providing a credit line to the Sakhalin II oil and gas development project.
Reichenbach said at the meeting that EBRD was currently reviewing its strategy in Russia and its Far East region for the next 2-3 years
The EBRD official said a bank delegation had met with the authorities and locals of the Korsakov district, where a protest was held Saturday against the construction of a natural gas liquefaction plant in area as part of the Sakhalin II project.
Malakhov said he supported the protesters' demands.
“The main source of dispute over the project is the slow reaction of participants in the Sakhalin II project to contentious issues that have arisen, against which the public has reacted swiftly,” the governor said.
On January 30, Russia's Green Party called for an investigation into the environmental damage caused by Sakhalin II, saying that an $11 million package of compensation from Sakhalin Energy to the local fishing industry was insufficient.
At a news conference with party representative Andrei Nagabin and Alexei Tyndik, a lawyer representing the interests of Sakhalin fisherman, Nagabin said, “The level of compensation should be calculated by independent specialists; funds received from the company have already gone to the construction of fish farms.”
Sakhalin Energy was established by Shell (which holds a 55% stake) and two Japanese companies, Mitsui (25%) and Mitsubishi (20%), to implement and develop the Sakhalin II project, which has an estimated cost of more than $20 billion. Sakhalin II is based on a production sharing agreement that was signed in 1994.
On January 27, Sakhalin Energy announced it had paid $11 million in compensation in October 2005 for environmental damage in the region.
In its statement, the company said, “The compensation paid went to developing four fish farms in Sakhalin, in accordance with an agreement between Sakhalin Energy, the administration of the Sakhalin Region, the Federal Fisheries Agency, and the state management of Sakhrybvod [the region's regulatory body for fishing]”
All construction and production work is being carried out on the basis of authorizing documents issued by the federal and local authorities, the company said, adding that work on installing a pipeline from the north to the south of the island was being carried out during the winter, when salmon does not spawn.

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