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Financial Times: Sakhalin receives green bill of health

By Catherine Belton in Moscow
Updated: 2:11 a.m. ET Oct. 9, 2007

Sakhalin Energy will announce on Tuesday that an independent consultant hired by a group of international banks has given it a clean bill of health on ecological standards as it seeks to raise up to $6bn in loans for the vast oil and gas venture.

The venture, which aims to supply liquefied natural gas from the far east island of Sakhalin, has been dogged by allegations of environmental violations, claiming that its former operator, Royal Dutch Shell, was harming the feeding grounds of the endangered grey whale.

Oleg Mitvol, Russia’s environmental watchdog, led a government campaign against Sakhalin Energy last autumn over the alleged violations, which led to Shell being forced to sell control of the $22bn project to state-run gas group Gazprom for $7.4bn.

A barrage of complaints about the project by environmental organisations had also held up talks with international banks, including the Japan Bank for International Co-operation and the US Export-Import Bank, for a loan worth up to $6bn.

The European Bank for Reconstruction and Development said this year it was pulling out of the consortium of banks following the ownership change.

Sakhalin Energy, however, is expected to announce on Wednesday that AEA, the independent consultant that has been assessing the project’s environmental performance for potential lenders since 2001, found a “high level of compliance”.

The AEA report states: “There are examples of laudable best practice. Where non-conformances with requirements have been identified . . . these are either minor in nature or else [Sakhalin energy] has plans in place for their resolution.”

The report says problems remain over onshore pipeline construction and the protection of grey whales.

Copyright The Financial Times Ltd. All rights reserved.

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