Bloomberg: Environmentalists Warn Sumitomo, ABN About Gazprom’s Sakhalin-2

EXTRACT: David Greer quit last week as project director and deputy chief executive of the joint venture Sakhalin Energy Investment Co., and left Shell as well.  Greer had issued a motivational memo to Sakhalin pipeline staff in April urging them to complete their tasks this year, saying he despised cowards. Shell has confirmed the nature of the note though the company said his departure was not linked to it.

THE ARTICLE

By Stephen Voss

June 27 (Bloomberg) — Environmental groups urged Sumitomo Mitsui Banking Corp., ABN Amro Holding NV and other lenders not to fund Russia’s Sakhalin-2 project, saying its environmental record hasn’t improved since OAO Gazprom took over.

State-run Gazprom bought a majority holding in the oil and gas project of 50 percent plus one share for $7.45 billion on April 18 from foreign owners Royal Dutch Shell Plc, Mitsui & Co. and Mitsubishi Corp., after months of threats by the Russian government to halt the project on environmental grounds.

Fifteen lobby groups including Friends of the Earth and the Worldwide Fund for Nature today wrote to lenders, including BNP Paribas SA, Mizuho Financial Group and the credit guarantee agencies of the U.S., U.K. and Japan, urging them to avoid the project because of its impact on endangered western gray whales and spawning salmon, soil erosion and potential oil spills.

“We have not seen a signal there’ll be any substantial improvement since Gazprom took over, so there is no reason for banks to finance the project,” Paul de Clerck, a campaign coordinator at Friends of the Earth International, said in a telephone interview from Brussels. “We believe there is a number of environmental violations.”

David Greer quit last week as project director and deputy chief executive of the joint venture Sakhalin Energy Investment Co., and left Shell as well.

Greer had issued a motivational memo to Sakhalin pipeline staff in April urging them to complete their tasks this year, saying he despised cowards. Shell has confirmed the nature of the note though the company said his departure was not linked to it.

EBRD Exit

The European Bank for Reconstruction and Development, a development bank sponsored by European governments, which had been considering funding the second phase of Sakhalin-2 for years, said in January it probably wouldn’t finance the project because the switch to majority state-ownership disqualified it.

“Be it before, during or after the Gazprom takeover, Sakhalin-2 has never been close to complying with Russian law, international best practice, and the policies of public and private banks that are considering financing for the project,” Dmitry Lisitsyn, chairman of Sakhalin Environment Watch, a locally based lobby group, said in the joint statement.

Shell, which is based in The Hague, owns 27.5 percent of the project, half its earlier stake, and provides most of the venture’s technical staff and senior managers.

The project is building Russia’s first liquefied natural gas export terminal, which is scheduled to start next year, once pipelines and other infrastructure are completed. Mitsui and Mitsubishi own 12.5 percent and 10 percent, respectively.

Jaap Huijskes, who has been a technical director at Sakhalin for 1 1/2 years, will fill Greer’s role as project director, Shell spokeswoman Sarah Smallhorn said.

Whales, Salmon

Shell has already rerouted an offshore pipeline to avoid the feeding ground of some endangered whales though environmental groups believe the project’s operations are still too close and interfere with feeding, de Clerck said.

Environmentalists also say 800 kilometers (500 miles) of pipelines that cross the island cause soil erosion and prevent wild salmon from spawning up river. Shell has said it’s taking adequate measures to protect wildlife.

While Shell and its partners have a general plan on how to deal with oil spills, the response does not detail plans for specific likely spill sites and has not been adequately disclosed to the public, de Clerck said.

Shell had no immediate response to the environmental group’s letter when contacted by Bloomberg, and there was no immediate reply to a message left for ABN Amro spokeswoman Carolien Pors.

Gazprom Meeting

Gazprom’s acting head Andrei Kruglov met with Jun Mizoguchi, the head of Sumitomo Mitsui Banking Corp. Europe Ltd., to discuss raising project financing for Sakhalin-2 and for other large output and transport projects, the Russian gas company said in a statement yesterday. They also discussed SMBC’s experience in financing LNG, petrochemicals and transportation projects.

Other environmental groups that signed the letter to lenders included Pacific Environment and CEE Bankwatch.

“Banks receiving the letter include the export credit agencies of the U.K., Japan and U.S., and private banks including RBS, BNP Paribas, Mizuho, SMBC, Bank of Tokyo-Mitsubishi, and others,” according to the environmental groups’ statement.

To contact the reporter on this story: Stephen Voss in London at [email protected]

Last Updated: June 27, 2007 10:42 EDT 

This website and sisters royaldutchshellgroup.com, shellnazihistory.com, royaldutchshell.website, johndonovan.website, and shellnews.net, are owned by John Donovan. There is also a Wikipedia segment.