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EBRD no longer considers current financing package for Sakhalin II
Bank is open to discussions with restructured Sakhalin Energy
Following a significant change in the ownership of the Sakhalin Energy
Investment Company, the EBRD will no longer consider the financing package of
the Sakhalin II project that it had been considering for the past five years.
If the new group of shareholders were to request it and make a case that the
project could be eligible for EBRD investment, the Bank could consider
financing in the future. The closer the project comes to completion, however,
the less value EBRD financing could add.
With the recent acquisition by the Russian company Gazprom of a majority stake
in Sakhalin Energy, there has been a significant material change to the
project which the EBRD had been considering. The shareholders and the
structure of the company have changed and the approach to financing has yet to
be decided by the new shareholders, meaning that it is not feasible for the
EBRD to pursue the current project.
In 2001, the shareholders of Sakhalin Energy -- Shell, Mitsui and Mitsubishi
-- asked the EBRD to partially finance Sakhalin II, which will produce
offshore gas and oil from Russia’s far eastern coast. Much collaborative work
was undertaken with Sakhalin Energy to ensure the project could meet the
expectations – especially environmental standards – of EBRD financing, but the
Bank had not taken any decision on whether to make the investment.
The EBRD declared a year ago that the project met sufficient requirements for
the Bank to seek the views of the public and conducted an intensive
consultation process in Russia, Japan and London. For the past year, pending
a decision on whether to finance, the EBRD has continued to monitor
construction and encouraged the adoption of long-term safeguards, especially
related to environmental and social aspects of the $20 billion project.
The EBRD saw its potential role in Sakhalin II as a financial partner to
encourage the highest standards of environmental protection in the design and
construction phases of the project, which includes offshore drilling and
underwater pipelines to Sakhalin Island, land pipelines for oil and gas, a
liquefied natural gas plant and oil and gas export terminals.
Through its engagement in the development of the project, the EBRD has helped
to introduce commitments to consultation, transparency and treatment of
indigenous people. The EBRD has worked with Sakhalin Energy on many
enhancements during the construction phase: Sakhalin Energy rerouted pipelines
to accommodate the rare Western Gray whale that feeds in the region; a panel
of recognised whale experts was established to monitor and advise on
operations; significant improvements were introduced to the strategy for
on-land pipeline construction, especially the environmentally sensitive
crossings of some 1000 rivers; and Sakhalin Energy adopted a standard-setting
plan for treatment of indigenous peoples as well as transparency and
consultation.
The EBRD made about one-third of its investments last year in Russia, more
than any other country among the 29 countries where the Bank operates.
Russia’s share of EBRD investments is forecast to continue to increase in 2007.
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