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Bloomberg: Japan Continues Sakhalin Funding Talks as Russia Takes Control

Japan Continues Sakhalin Funding Talks as Russia Takes Control

By Hector Forster

Jan. 12 (Bloomberg) — Japan Bank for International Cooperation will continue talks to help fund the $22 billion Sakhalin-2 oil and gas project after Russia’s state-owned OAO Gazprom took control of the project from Royal Dutch Shell Plc.

Gazprom’s entry prompted the European Bank for Reconstruction & Development to cancel plans to provide a loan of about $300 million, the European Bank’s President Jean Lemierre told reporters in London yesterday.

“We have not decided to withdraw funding, it is currently under assessment,” Tokyo-based Japan Bank’s spokesman Ryutaro Nishizaki said by phone today, declining to give any details on the proposed loan.

The European Bank’s withdrawal may prompt cancellation of a further $7 billion in loans from other state-owned credit agencies and commercial banks, who expected the European Bank to take the lead. Last year, the European Bank said environmental clearance for the project by the bank would influence larger loans from other government and private-sector banks in Japan, the U.S. and Europe.

Gazprom, Russia’s gas export monopoly, agreed last month to buy a 50 percent stake in the venture on Sakhalin Island, in eastern Russia, from foreign partners Shell, Mitsui & Co. and Mitsubishi Corp. JBIC was planning a $3.5 billion direct loan for Sakhalin-2, Project Finance International magazine said in February 2005.

Gazprom’s Acquisition

Gazprom’s acquisition of shares, scheduled for completion by the end of February, will leave The Hague-based Shell with 27.5 percent, Mitsui with 12.5 percent and Mitsubishi 10 percent.

The European Bank, set up by Western governments in 1991 to help build market economies in Eastern Europe and former Soviet states, was under pressure from environmentalists, who claim the Sakhalin-2 project’s impact on salmon and whales, and other environmental, social and safety matters, make it unworthy of funding.

The bank had been monitoring the project since 2002 as part of its due diligence process, including holding public consultations on Sakhalin Island last year.

To contact the reporter on this story: Hector Forster in Tokyo at [email protected] .

Last Updated: January 12, 2007 04:02 EST and its also non-profit sister websites,,,,, and are all owned by John Donovan. There is also a Wikipedia article.

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