WWF - News & Publications: Sakhalin II

Future for endangered whales lies with IWC

2012-07-02

Panama City – The 64th annual meeting of the International Whaling Commission (IWC) opens today in Panama. The conference comes at a time intense pressure on whales, dolphins and porpoises from human activities. Governments are set to discuss severe marine threats such as oil and gas exploration and fisheries bycatch, which are driving some cetacean populations to near extinction, as well as stronger measures to protect cetaceans, such as sanctuary establishment.

"IWC member governments have already begun to strengthen the convention's conservation agenda and we are urging them to keep conservation front and centre at this week's meeting," said Wendy Elliott, head of WWF's delegation. "The most severe threats to whales today are the result of industrial activities like off-shore drilling and commercial fishing that must be better managed. IWC countries have the opportunity this week to show leadership and protect cetaceans in their national waters and on the high seas."

Oil and gas expansion

WWF has learned that oil giant Shell plans to begin drilling operations in the Beaufort and Chukchi seas off Alaska as early as this month, which could mark the beginning of a massive oil exploration effort throughout US Arctic waters. The harsh Arctic environment with its rough seas, violent storms, icy waters and long periods of darkness renders current spill response procedures woefully inadequate. Technology simply does not exist to clean up an oil spill in these conditions.

Similarly, in the Russian Far East, oil companies are planning to build new off-shore drilling platforms near the feeding area of critically endangered western gray whales. There are only an estimated 26 breeding females remaining and the oil-rich zone off Sakhalin Island is the only place where they can teach their calves to feed.

The noise generated by oil and gas exploration results in some of the loudest sounds that can be produced underwater by man. The explosive pulses generated by seismic testing airguns can disrupt whales' behaviour and even cause their death.

Saving the smallest

WWF is extremely concerned about the survival of Maui's dolphins in New Zealand and Mexico's vaquita porpoises, two critically endangered cetaceans at risk of extinction due to entanglements in fishing gear. Fisheries bycatch is estimated to kill 300,000 whales, dolphins and porpoises each year. There are fewer than 200 vaquitas left and only 55 Maui's dolphins over one year old. To save them, WWF is calling for an immediate ban on the use of gillnets in their entire habitats.

Iceland's fin whale hunt

WWF remains deeply concerned that Iceland could resume commercial hunting of fin whales, an endangered species. WWF urges the government of Iceland to adhere to the internationally agreed moratorium on commercial whaling and publically commit to stopping its fin whale hunt for good.

Whale sanctuaries

A proposal to establish a whale sanctuary in South Atlantic waters between Africa and South America is set for debate at this week's meeting. WWF urges parties to support a sanctuary in this region where whale-watching has been steadily increasing, providing ecotourism income, benefits for local communities, and research opportunities.

Follow us on Twitter @WWF or @Wendy__Elliott for live updates from the IWC meeting

Oil drilling suspension should top agenda at arctic emergencies meeting

2010-06-16

Vorkuta, Russia: As oil continues to spew into the Gulf of Mexico from a sunken BP drilling rig, a key meeting of arctic countries starting today needs to push for a suspension of all arctic drilling until the region can deal with the risks, WWF said.

Greg Bourne, a former BP executive now with the global environment organisation, said imagining nations could deal with a drilling accident in the Arctic with current technology and resources would be "a triumph of hope over experience and reason".

The Arctic Council recently updated and revised guidelines for offshore oil and gas drilling, but those guidelines, even if implemented, would not go far enough to prevent or contain catastrophic spills such as last year's Timor Sea blowout which took 73 days to stop or the current Gulf of Mexico oil confirmed as the worst in US history and still unresolved.

WWF maintains that the revised guidelines do not go nearly far enough and the Arctic Council Emergency Prevention, Preparedness and Response (EPPR) Working Group needs to use the Vorkuta meeting commencing today to strongly urge the Council to impose a halt to drilling plans for this year over a wide spread of the Arctic.

This year exploratory drilling is scheduled to occur off the west coast of Greenland. In Norway, the government is considering opening up areas of high ecological value outside of Lofoten and Vesterålen for oil exploration. In Russia, exploratory drilling is scheduled in the Kara Sea and the Ob river estuary near the Yamal Peninsula.

Nationally, no new drilling should occur until there is the capacity to rapidly and effectively respond to spills in arctic waters.

"It is time for the arctic states to recognize that offshore oil drilling with current technology and response capability poses unacceptable risks in the Arctic" says Aleksey Knizhnikov, Oil & Gas Environmental Policy Officer for WWF-Russia who is attending the Vorkuta meeting.

"Norway and the United States have already taken the first step, by putting off any further arctic offshore drilling until an investigation into the Gulf disaster is over. But we already know that whatever that investigation reveals, it will not diminish the risks of arctic drilling."

Arctic offshore oil drilling is facing increasing opposition from local peoples. A recent poll commissioned by WWF-Norway indicated that almost one out of four Norwegians has become more negative to oil exploration in Lofoten and Vesterålen following the Gulf spill. In both Canada and Alaska, local Indigenous peoples are also opposing offshore oil development until or unless they can be assured that it can be done safely.

"The offshore exploration and production industry are pushing at the very limits of technology and the ability to safely handle and control that technology," says Greg Bourne, CEO of WWF-Australia, and formerly a Drilling Manager and Regional President with BP in Latin America and then Australasia.

"The Gulf of Mexico is the world's centre of drilling technology with thousands of engineers and immense resources in terms of boats, planes, control equipment and manufacturing facilities - and even here it is proving immensely difficult to handle the tragic event of the Gulf of Mexico blowout.

"To even conceive of being able to control a similar event in the Arctic would be a triumph of hope over experience and reason. The consequences of such an event in the cold climate would lead to a persistence of ecological damage over many decades," Bourne says.

WWF is currently updating a study of the oil spill response gap in the Arctic, showing that current technology is incapable of effectively cleaning up oil spills in ice covered waters.

Link to web-quality material: http://www.youtube.com/user/WWFNorge#p/a/u/0/dCSbY5nsjks

For further information:

In Vorkuta, Russia: Aleksey Knizhnikov, Oil & Gas Environmental Policy Officer, WWF-Russia, aknizhnikov@wwf.ru, Tel: +7 910 4280514

International: Patrick Lewis, Responsible Industry Officer, WWF Arctic Programme, plewis@wwf.no, Tel: +47 92 62 30 30

About WWF
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WWF files court proceedings against UK ECGD over Sakhalin II

2007-08-15

WWF has filed court proceedings against a British government department to expose operations that undermine the UK's 'ethical foreign policy' and are seriously damaging the environment. WWF, in partnership with environmental and social justice organisation The Corner House, has filed the case against the Export Credit Guarantee Department (ECGD) - the government department charged with facilitating British business abroad.

This follows the discovery, through a Freedom of Information (FoI) request, that ECGD had committed to underwriting $1bn of contracts for the Sakhalin Energy Investment Company (SEIC) - despite three years of assurances to the British public that this decision was still being considered.

SEIC is a Bermuda-registered company responsible for Sakhalin II, a major oil and gas development in Russia. The Sakhalin II project, which is, in fact, almost completed, has already caused serious environmental damage and threatens the extinction of the western Pacific gray whale.

In a letter from ECGD to SEIC dated 4 March 2004, which WWF received as part of the FoI request, ECGD gave a legally-binding commitment to support Sakhalin II subject to certain conditions being met.

But the very next day (5 March 2004), DTI minister Mike O'Brien told parliament that no decision had been made. "ECGD is awaiting further information on this issue and will want to be sure that the potential impact on the western gray whales is minimised. I am aware of the range of issues to which this project gives rise and I will approve support only if I am satisfied that these have been addressed," he said.

Almost $1 billion of UK taxpayers' money would be at risk from ECGD's support for the project.

James Leaton, WWF-UK's Oil and Gas Policy Adviser, said: "ECGD's support for the Sakhalin II project effectively gave the backing of the UK government to an environmental catastrophe. ECGD has paid lip-service to the environment, but shows no intention of taking concrete action to prevent damage caused by the projects it backs. Supporting this project shows no coherence across the UK government on protecting biodiversity or tackling climate change."

Nick Hildyard, a co-director of The Corner House, said: "ECGD has broken its own policies. It says that it only gives a commitment to support after it has assessed the environmental impacts of a project. But, in this case, it gave a legally-binding promise before getting assurances on the environment. It is impossible now to address many of those impacts, since the work has already been done. ECGD must not be allowed to offer UK government money willy-nilly to environmentally damaging business ventures benefiting foreign countries."

Endangered whales vanishing from Russian waters

2007-07-03

Moscow, Russia – Noise pollution from a gas and oil project in the Russian Far East is the likely cause behind critically endangered western gray whales abandoning their only known feeding area.

The installation of a platform by Sakhalin Energy at Shell's Sakhalin II project site has resulted in constant, high noise levels underwater for over two days.

A WWF monitoring team has been able to feel the vibrations of the construction work at their base onshore. The ships that are involved in the platform construction 12km offshore make low-frequency noise that may affect the feeding patterns of the whales and harm their auditory system, which is crucial for their orientation capability.

The whales are normally seen feeding adjacent to the shore.

"Shell has been warned by experts of the need to limit both the duration and level of noise, but the company will not let protecting the whales interfere with its construction schedule," said James Leaton, WWF's Oil and Gas Policy Advisor.

"There are only around 100 western gray whales remaining in the world, so any impact on the population could be catastrophic for its future viability."

Scientists recently confirmed that just one extra female gray whale death per year would be likely to result in their extinction. WWF is also concerned that more 'skinny' or emaciated whales were seen last year than any year since 2001 as it suggests disruption of feeding.

Sakhalin II is the world's largest combined oil and natural gas development project and involves the installation of an offshore platform on an existing oil field and the installation of a single platform on a gas field. These platforms, as well as one other, will be linked to the shore by offshore pipelines. The oil and gas will then be transported via 800km of onshore pipelines to Prigorodnoye, in the south of Sakhalin Island and the export terminals.

An expert panel has been convened to advise Shell on the whale issue. However, the most recent meeting was hindered by Shell failing to provide adequate information on previous noise levels or on future construction plans. As a result, Shell is operating without following the best scientific advice.

"Shell needs to halt operations while the noise levels are investigated," Leaton added. "Otherwise, Shell could be responsible for the extinction of the western gray whale."

END NOTES:

• Shell has only released summary data for the weekend (30 June–1 July 2007), which shows that the average hourly noise levels for two days were around 120dB. This is likely to have resulted in excessive exposure for the whales in terms of either a high level of noise or the duration of noise.

•Sakhalin II–Gazprom is the majority shareholder (50% plus one share) in Sakhalin Energy Investment Company Ltd. Shell continues to be the operator of this project responsible for its construction.

•Shell continues to refuse to release draft oil spill response plans for the project, despite repeated calls from stakeholders. The unstable ice conditions that prevail for six months of the year render normal response mechanisms useless. With original timetables indicating winter oil production less than six months away, this is unacceptable.

•ABN Amro have been criticised for their role in financing the Sakhalin II project without paying adequate attention to environmental and social issues. ABN Amro has provided a US$1 billion loan to finance Gazprom's entry into the project, but has this type of deal is not covered by any environmental due diligence.

For further information:
Alexandra Hartridge, Press Officer
WWF-UK
Tel: +44 1483 412347
E-mail: ahartridge@wwf.org.uk

Shell breaches financing conditions for Sakhalin again

2006-11-29

A report recently released by the Western Gray Whale Advisory Panel has revealed that Shell's Sakhalin construction activities in 2006 clearly breached three of the panel's recommendations. The recommendations relate to the provision of adequate protection for critically endangered western Pacific gray whales that feed adjacent to the offshore construction area. The expert whale panel was set up to help protect Sakhalin's last 100 gray whales.

Robert Napier, WWF-UK Chief Executive, said: "Shell has ignored the expert panel's recommendations and exposed the whales to excessive noise. This is yet another breach of EBRD environmental criteria, crucial to the Bank agreeing to support Sakhalin. When will the Bank move to protect its own reputation by disassociating itself from Sakhalin II?"

The report bemoans the lack of data provided by Shell and concludes that even limited analysis has shown that there was an effect on the whales by displacing them offshore. There is concern that this could reduce their access to food. However, Shell continues to make unfounded claims that their operations are causing no impact on the whale population.

Earlier this year the EBRD stated in their consultation that: "If that panel (the Western Gray Whale Advisory Panel) does not operate or is not formed and its recommendations are not taken on board by the company (Shell), then this project does not go to our Board."

In May 2004 the UK's then Environment Minister, Elliot Morley MP, said: "Let me re-emphasise that the Government is still considering the project [Sakhalin] and will only agree to support it if we are satisfied that, amongst other things, the best scientific advice is being followed and that the risks to the whales are minimised."

The UK Government is considering funding the troubled project through the Export Credit Guarantee Department (ECGD), which held a consultation earlier this year on the proposed funding.

The panel continue to be concerned about Shell's ability to respond in the harsh Sakhalin conditions, especially winter sea ice. The scientists expect to see measures that are sufficient to protect western gray whales and their habitat, with a higher standard necessary because of the population's vulnerability and endangered status.

James Leaton, WWF oil and gas officer, said: "Shell has blamed the lack of the required monitoring of whales during the noisiest construction activities on bad road conditions that prevented access. How does the company expect to respond to an oil spill in this region if it cannot even get whale monitoring teams there?"

Shell's Sakhalin II environmental oil permit cancelled

2006-09-19

The Russian government has cancelled an environmental permit for Shell's $20 billion oil and gas project in the far east of Russia. This has the potential to suspend the construction of the project until the permit is satisfied.

This officially confirms the problems the project has had regarding pipeline construction and erosion control, which have been raised by WWF over the last two years. The pipelines run 800 kilometres, the length of Sakhalin Island, crossing 1,000 watercourses.

The project has breached local and international construction standards over the last few years despite calls for standards to improve. The decision to cancel the permit comes at a crucial time as the European Bank for Reconstruction and Development (EBRD) are considering whether to approve a loan to the project, which would give it environmental and social credibility.

The UK's Export Credit Guarantee Department (ECGD) is also considering whether to loan the project money.

James Leaton, WWF oil expert, said: "In light of this intervention by the Russian government the EBRD should review its continued interest in the Sakhalin-2 project. The Bank's policies clearly state projects must comply with local regulations."

"There are ongoing environmental problems that Shell has failed to address. Poor construction not only results in environmental degradation but also in increased financial risks to the project from disruptions due to landslides and oil spills."

Shell breaks environmental standards...again

2006-05-21

London, UK – Documents obtained by WWF show that Shell's Sakhalin II oil and gas project in Russia's Far East continues to break environmental standards. As a result, WWF believes that the European Bank of Reconstruction and Development (EBRD) should uphold its environmental standards and decline funding of the project.

The independent assessors report sets out numerous breaches of environmental standards set by the EBRD. These breaches happened during the construction of pipelines at river crossings. In some instances the report shows that there were up to ten breaches of environmental standards during a single river crossing. The pipeline crosses 1,000 streams and rivers some of which are world class salmon rivers.

"Two years ago WWF proved to the EBRD that Shell was breaching its environmental standards on river crossings during construction," said Robert Napier, WWF-UK's Chief Executive.

"Unfortunately, even though Shell promised to tighten the process up, these documents prove yet again that Shell continues to break standards. The EBRD should protect its own reputation and decline funding to the Sakhalin project."

Disturbingly, the version of the same report published on the project's website differs, showing the work in a more favourable light. The report covers the period from December 2005 to April 2006. Coincidentally. this is the same period of time as the EBRD's public consultation on whether they should fund the project. Shell's sustainability report published last week claims that the company had reported "in full" on the river crossings. This is not the case.

"If the EBRD has not seen this report they must question whether they can trust their potential client," said James Leaton, WWF-UK's oil and gas expert. "The EBRD has made it clear that improved river crossings are an essential benchmark to getting finance. Shell's ongoing problems have now been exposed and it is clear that they have not met the EBRD's benchmark."

Equator Principles signatories such as ABN Amro and the Royal Bank of Scotland are currently considering the project and should be equally concerned over the lack of progress on the project, which is now 70 per cent completed. Banks that have signed up to the Equator Principles have signed up to only funding projects that are environmentally sound.

For further information:
Anthony Field, Press Officer
WWF-UK
Tel: +44 1483 412379
E-mail: afield@wwf.org.uk

Shell poses unacceptable oil spill threat

2006-04-28

Gland, Switzerland – The European Bank for Reconstruction and Development (EBRD) should demand effective environmental protection measures for oil spills from Shell or decline funding for its Sakhalin project, says WWF.

Currently, Shell's oil and gas project in Russia's Far East will expose a highly endangered whale population and a pristine arctic environment to unacceptable risks from marine oil spills that could last for years.

A WWF new report — Offshore Oil Spill Response in Dynamic Ice Conditions — concludes that the highly dynamic sea ice conditions around Shell's Sakhalin operation, which can last for more than six months of the year, would mean that the company would not be able to respond to an oil spill for half of the year or longer. Traditional oil spill response methods are rendered impotent because of the predominant sea ice and prevailing weather conditions. WWF commissioned the report from independent oil and gas experts.

"It is shocking to see that in the rush to develop new oil and gas supplies Shell continues to gamble with the environment," said Paul Steele, WWF International's Chief Operating Officer.

"This is the most difficult place on earth to have to respond to an oil spill. Even with the latest technology it would be impossible to clean up oil spills for 50 per cent of the time. Wave heights in spring and winter are often five times higher than current recovery methods can cope with."

There is also a very real potential that any unrecovered oil would contaminate the feeding ground of the last known population of western gray whales, as well as the surrounding marine environment, for years.

In a briefing paper, Shell proposes to use natural openings, called polynyas, in the sea ice to burn off any oil spills. However these ice clearings are a vital focal area for marine life from plankton to marine mammals. Burning oil in them could have impacts on the entire food chain that Shell has not considered.

"The EBRD can not agree to fund this project, while remaining consistent with its environmental values and maintain its credibility," Steele added. "If it goes ahead and funds Sakhalin, its environmental reputation will be heavily tarnished."

Shell has not produced oil spill models for the Sakhalin II project with sea-ice conditions. The report goes further in emphasizing that there are no existing mathematical models to predict the movement of oil in ice. Without this information the environmental impact assessment is incomplete.

The Sea of Okhotsk is one of the most challenging places to drill for oil with sea ice for six months of the year as well as dense fog, high winds and waves. However in the summer months it comes alive with a wealth of migratory species including the endangered Steller's sea eagle and the western gray whale. Drilling for oil in such a fragile area important for wildlife is the reason why rigorous contingency plans should be in place for oil spills.

"Experts estimate that there is a 24 per cent chance of an oil spill during the lifetime of this project," said Steele.

"Oil spills this winter in Alaska and off northern Japan must act as a warning. Neither spill was detected quickly enough and neither has been cleared up. The spill off Japan has killed thousands of birds – including some endangered ones. The lack of sufficient technology to clean up a spill in icy conditions raises serious questions over Shell's and other company's ambitions in the Arctic."

END NOTES:

• The EBRD are holding a consultation on whether or not they should fund Sakhalin II. This consultation was extended by a week and now closes on 28 April 2006.

• Shell is the majority shareholder (55%) in Sakhalin Energy Investment Company Ltd, the company building Sakhalin II, with smaller partners including Mitsui & Co Ltd (25%) and Mitsubishi Corp (20%).

• With pipelines cutting across 800km, crossing 1,000 watercourses, and the construction of a drilling platform and a liquefied natural gas plant, Sakhalin II is currently the largest hydrocarbon construction project in the world. However, it has been bedevilled by cost overruns with the total cost now doubled to over $20 billion. Since it has started construction it has broken a number of EBRD environmental and social policies.

For further information:
Olivier van Bogaert, Senior Press Officer
WWF International
Tel: +41 22 364 9554

WWF calls for suspension of oil and gas project in Russian Far East

2006-04-21

London, UK – The European Bank for Reconstruction and Development (EBRD) should not fund Shell's proposed construction of the world's largest hydrocarbon project in Russia's Far East without improved environmental mitigation measures, says WWF. The EBRD's consultation on the whether to fund the Sakhalin II oil and gas project closes today.

A recent review by some of the world's leading whale experts concluded that Shell has provided no convincing evidence that the project is not harming the 100 remaining western gray whales. With only two months to go before offshore pipeline construction starts, the scientists reviewed the proposed mitigation measures and concluded that they could not be confident there would be no significant impact on the whales.

"Shell must stop this project now and assess the condition of the whale population this summer before they proceed with any more construction," said WWF-UK's oil expert James Leaton. "Currently, Shell is ignoring the science and the EBRD cannot guarantee the future of the whales, so they should not finance the project."

"There is no room for error with this critically endangered whale population," he added. "Shell has had years to develop adequate measures, yet they keep coming up short and ploughing on with their construction agenda. There is a full schedule of work planned for this summer, including some of the noisiest construction activities."

At the recent meeting in Vancouver, Canada, scientists confirmed that just one extra female death per year would be likely to result in their extinction. WWF is also concerned that more "skinny" or emaciated whales were seen last year than any year since 2001 as it suggests disruption of feeding.

There are now several areas where the whale scientists' recommendations have been ignored. Shell installed a platform base last summer in dense fog during the peak whale season, despite the fact that noise limit discussions have only just been concluded with the experts. They also chose to ignore suggestions to reduce vessel speeds to minimise collision risk.

Previously, in an initial report in February 2005, the scientists called for a precautionary approach – meaning the suspension of construction until conclusive research had been carried out. Shell pushed ahead with their construction programme while commissioning new research. However, in their latest report the information on the monitoring of noise and whales provided by Shell from last summer was described as "uninformative" for this purpose. Shell's 2005 noise data suggests that the whales were exposed to over 130dB for periods exceeding an hour, which the scientists consider unacceptable. The panel of scientists concluded that any claim there had been no impact was "unfounded".

The consultation period included public meetings to comply with EBRD policy. It was disappointing that public comments were not taken more seriously. Many concerned stakeholders labelled it a cosmetic exercise designed to provide a justification as to why the project should be approved by the EBRD.

The EBRD appeared to have made up their mind that everything is fine with the project and the scope of the consultation was restricted. It feels as if the EBRD is being sucked in by Shell's propaganda when there are significant gaps in the project. For example, the official oil spill recovery plan has not been presented for review.

"How can there be a proper consultation if this crucial document is not publicly available to assess," said Leaton.

END NOTES:

• Shell is the majority shareholder (55%) in Sakhalin Energy Investment Company Ltd, the company building Sakhalin II, with smaller partners including Mitsui & Co Ltd, (25%) and Mitsubishi Corp. (20%).

• With around 800km of pipeline crossing 1,000 watercourses and the construction of a drilling platform and a liquefied natural gas plant, Sakhalin II is currently the largest hydrocarbon construction project in the world. However, it has been bedevilled by cost overruns with a total cost now doubled to over US$20 billion. Since it has started construction it has broken a number of EBRD environmental and social policies.

For further information:
Anthony Field, Press Officer
WWF-UK
Tel: +44 1483 412379
E-mail: afield@wwf.org.uk

Letter to the European Commission regarding Shell's Sakhalin II project in Russia

2006-03-15

EBRD shouldn't fund Shell's Sakhalin project

2006-02-28

London, UK – WWF is urging the European Bank for Reconstruction and Development (EBRD) not to fund Shell's Sakhalin II project in Russia's Far East.

In its submission to the EBRD's public consultation, WWF has highlighted where the project's environmental and social standards fail to stand up to those the Bank was founded on.

"WWF believes that if the EBRD funds this project it will be opening the door to lower environmental and social standards across the region it is trying to develop," said Robert Napier Chief Executive of WWF-UK.

"Shell has had three years to resolve the issues highlighted with Sakhalin II but the simple truth is that this proposal doesn't stand up to detailed scrutiny. If the EBRD goes ahead taxpayers money will be used to fund a project that the Bank has already admitted does not meet its policies."

In admitting that the project doesn't meet its policies, WWF is concerned that the EBRD is contradicting previous Bank statements that say "every project proposed for EBRD funding must comply with the Bank's environmental policy" and that it "sets new standards in environment".

"If the Bank funds Sakhalin II there is serious potential for not only the environment but also its reputation to be damaged," Napier added.

Earlier this year the local Sakhalin community protested over the damage to fisheries caused by Shell's activities; a complaint recognized by the EBRD, and local residents including the Sakhalin Regional Governor recently protested with banners calling for the EBRD to not fund the project.

In addition, whale experts are still not satisfied by Shell's proposals to protect the last 100 endangered gray whales from noise, collisions and oil spills. And, Shell has not presented any comprehensive oil spill response plan for winter sea-ice conditions. With construction half-completed and decisions already made, Shell is only now creating its indigenous peoples plan. The timing of this plan is flawed and therefore it does not comply with EBRD policy.

Shell is also not meeting the most basic requirements for reducing impacts of river crossings, such as constructing both oil and gas pipelines simultaneously, as required by its construction permits. The project is subject to ongoing legal battles in local courts, and has already had a judgement against it. EBRD policy states that they should not fund a project that is not in compliance with all regulations.

"It is absurd to be asked to consult on the proposal when it is not complete," said James Leaton, WWF oil and gas officer. "In an area which is covered by ice for six months of the year an oil spill could be devastating. Traditional methods such as booms would be useless and dispersants can't be used because of the threat to the critically endangered whales."

In addition to the whales, WWF believes the Production Sharing Agreement to be a very bad deal for Russia, especially for the people of Sakhalin. This lack of development benefits continues at all levels, with, for example, a specific sustainable development fund being used to construct housing for Sakhalin project workers rather than for local benefits.

"It is indicative of the project that local people struggle to gain access to reliable energy while Shell will be pumping gas away from the island," continued Leaton. "The money the EBRD would make from this project will not be worth the loss of credibility and the risk of being responsible for the extinction of a species."

For further information:
Anthony Field, Senior Press Officer
WWF-UK
Tel: +44 1483 412379
E-mail: afield@wwf.org.uk

Too little too late for Shell's Sakhalin project

2005-12-15

London, UK – The European Bank for Reconstruction and Development (EBRD) acknowledges that Shell's Sakhalin II oil and gas project has breached their environmental policies in its on-going construction. This confirms WWF's view that the project has already created so much environmental risk and damage. The global conservation organization says that it is too late to ask for financing halfway through the project and that EBRD funding should not be approved.

The 120-day public consultation announcement by the EBRD is the final opportunity to stop further environmental devastation by Shell on the Island of Sakhalin in Russia's Far East. After the consultation, the bank will make a decision on whether to finance the project.

"EBRD's continuing delay in making a final decision on financing reflects the ongoing controversy with respect to Shell's disregard to basic environmental standards in its execution of the project to date," said James Leaton, WWF's oil and gas policy ffficer.

WWF remains especially concerned about the fate of the critically endangered western gray whale. Shell obtained scientific advice from a panel of whale experts but has disregarded key elements, such as maximum noise levels. A study by WWF and the International Fund for Animal Welfare this past summer has shown that these whales have already been affected by the construction of the oil platform.

WWF looks forward to actively contributing to an open and transparent consultation to ensure that all relevant information concerning the environmental damage already incurred and the future risks is made publicly available.

"Shell has produced much documentation and many assurances on this project over the years but sadly, all the on-the-ground evidence from Sakhalin shows that bad practice continues," Leaton added.

"Sakhalin II's drilling platform and river-crossing pipelines bring a raft of threats to the endangered whale population as well as important salmon spawning streams that are the mainstay of the local fishing communities. WWF remains resolute that this project does not meet acceptable environmental standards."

For further information:
Anthony Field, Senior Press Officer
WWF-UK
Tel: +44 1483 412379
E-mail: afield@wwf.org.uk

Shell oil platform in Russia's Far East driving whales towards extinction

2005-12-14

Gland, Switzerland – An oil platform, constructed by Royal Dutch Shell in the Russian Far East, is disrupting the feeding patterns of the last remaining 100 Western Pacific grey whales, according to a survey by WWF.

Results from the survey carried out from July to September — the whale's peak feeding period — showed fewer whales in the area closest to the platform, which covers a fifth of their only known feeding grounds. Earlier this year, Shell ignored the findings of an independent panel of distinguished scientists that recommended against constructing a platform near the whale's feeding area.

"I am extremely concerned that the installation of the platform may have caused significant dislocation of the whales," said Richard Steiner, a professor at the University of Alaska. "This does not bode well for the future of the whales and calls into question Shell's professed commitment to the environment."

Professor Steiner resigned from the independent panel following Shell's refusal in July to delay the installation of the platform. At that time Shell had agreed not to "plan, implement or continue any activity found to have a biological impact on the whale population".

The platform is part of a multi-billion gas and oil development project known as Sakhalin II, which consists of three offshore platforms, offshore and onshore pipelines, an onshore processing facility, a liquefied natural gas facility, and an oil and gas terminal. However, the Shell-led consortium — including other multi-nationals like Mitsubishi and Mistui — relies on financing from the European Bank for Reconstruction and Development (EBRD).

In May 2005, the head of the EBRD determined that the project was "unfit for purpose" due to Shell's disregard for environmental considerations. The bank could make a decision as early as Wednesday on whether it will fund the Sakhalin II project.

"Shell has failed to meet even its own environmental standards on its projects," said Paul Steele, WWF International's Chief Executive Officer. "We urge the bank to decline financing until Shell properly faces up to its responsibilities."

WWF calls on Shell to suspend all offshore activities pending results of next year's whale monitoring programme and to suspend all construction activities for river crossings pending an independent assessment. Shell should be required to restore degraded rivers and tributaries and compensate local fishing communities for loss of livelihood as a consequence of current practices. Shell should also present an oil spill prevention programme that meets internationally acceptable standards, particularly in the harsh, icy conditions off Sakhalin's coastline.

For further information:
Claire Doole, Head of Press
WWF International
+41 79 477 3564
E-mail: cdoole@wwfint.org

Unfit for purpose: Shell consortium profiting from the riches of Russia's Far East

2005-12-01

It has been a windfall year for international energy companies, capitalizing on record high gas and oil prices. And, with demand still high, the race to find more of these precious non-renewable resources is on. But at what cost?

Although future exploration could help alleviate escalating gas prices and reduce a nation's dependence on imported oil, many of these companies — in their quest to maximize profits — are failing to meet their corporate and social responsibilities to local communities and the environment, the respective guardians and providers of these resources.

No place is this lack of responsibility more evident than in Russia's Far East where the Royal Dutch Shell company — whose recent third-quarter results showed net income grow at an outstanding 68 per cent to US$9.03 billion from US$5.37 billion a year earlier — has embarked on a multi-billion gas and oil development project. The Shell-led project, which includes other multi-nationals like Mitsubishi and Mitsui, consists of three offshore platforms, offshore and onshore pipelines, an onshore processing facility, a liquefied natural gas facility, and an oil and gas terminal.

Known as Sakhalin II, this ambitious project will have severe, if not irreversible environmental impacts, particularly as the oil pipeline will cross over 1,000 wild rivers and tributaries, many of them important to salmon spawning. In addition, a million tons of dredging waste has been dumped against public protest into Aniva Bay — an area crucial to the livelihood of the island's indigenous community — has led the destruction of the local fishery and other marine species like scallops. And to make matters worse, an oil platform is being built at the very spot where the last 100 critically endangered Western Pacific gray whales feed off of Sakhalin Island.

Although Shell agreed to move the offshore pipeline around the whale's feeding area, they ignored the findings of an independent panel of distinguished scientists that recommended not constructing an oil platform in the vicinity. Such an action falls short of international best practices and adheres to a pre-determined construction schedule with little regard to serious long-term environmental concerns. It also shows that Shell has clearly chosen its profits over its self-inscribed principles of responding to potential impacts of its operations on the environment.

By Shell's own estimates, there is a 24 per cent chance that there will be a major oil spill during the life of the 40-year project. This is a cause to worry. The Exxon Valdez oil spill disaster of March 1989 in Alaska's once pristine Prince William Sound, which cost the oil company US$2.1 billion to clean up over three years and caused extensive environmental damage, should be a case in point for proceeding with extreme caution at Sakhalin. But, proceeding with caution has not been part of the overall game plan to get this project up and running.

Shell's ability to pull off the US$20 billion mega-project, which includes a cost overrun of US$10 billion, however, relies on financing from the European Bank for Reconstruction and Development (ERBD). This public institution, which is mandated to support "environmentally sound and sustainable development", will soon determine if the Sakahlin II project is "fit for purpose" and whether or not the consortium has developed the appropriate assessments and procedures to prevent adverse environmental impacts.

In May 2005, the head of the ERBD already determined that the project was "unfit for purpose" due to Shell's disregard for environmental considerations. Six months on, the bank should reach the same conclusion and decline financing until Shell faces up to its environmental responsibilities.

This includes suspending the placement of the oil platform pending results of next year's whale monitoring programme that will provide further information on the status of the whales, as well as suspend all construction activities for river crossings pending an independent assessment. Shell should be required to restore degraded rivers and tributaries and compensate local fishing communities for loss of livelihoods as a consequence of current practices. Finally, Shell should present an oil spill prevention programme that meets internationally acceptable standards, particularly in the harsh, icy conditions off the Russian island's coastline.

The ERBD's decision will no doubt be a litmus test for other banks and financial institutions to follow when it comes to financing such questionable and poorly-managed projects. Taking the most basic precautionary measures to avoid irreversible environmental destruction is not only socially responsible, but equally important to long-term profits and a company's reputation. Better environmental management will truly serve investors and whales alike.

* Dr Claude Martin is Director General of WWF International

This opinion editorial appeared in the International Herald Tribune on 1 December 2005.

Shell fails European Bank's funding requirements

2005-11-27

London, UK – The European Bank for Reconstruction and Development (EBRD) should continue to declare Shell's Sakhalin II project in the Russian Far East as unfit for purpose because the project's environmental and social standards are continually failing to meet the Bank's funding preconditions, reveals a new WWF report.

The report, Risky Business – the new Shell, is being launched the day before the EBRD's board meets to reconsider whether to fund the project and highlights the gap between Shell's performance on the ground and the EBRD's policies for approving financial support for such a project.

"WWF is surprised and shocked by Shell's unacceptable management of the project and the negative impact on Sakhalin's people and environment," said Robert Napier, WWF-UK's Chief Executive.

"WWF sees no progress on Shell's part to suggest why the EBRD would now take the decision to lend support. The critically endangered western gray whales have been exposed to unnecessary risks and unknown impacts that if continued threaten them with extinction. This damning report highlights the many areas where Shell's own Environmental Impact Assessment is lacking, and falls short of the EBRD funding requirement."

In particular the report found Shell's Environmental Impact Assessment (EIA) to be seriously lacking and cites specific examples where their activities are causing damage to Sakhalin's environment and local communities: gray whales are being threatened; salmon spawning areas have already been destroyed; and fishing catches are being decimated – down around 70 per cent (over 1,000 tonnes) in some areas.

WWF believes that the continuing damage will lead to additional costs and delays to a project that is already overrunning.

"This project represents a key test for investment principles and policies of both public and private banks," added Napier. "If they, or other financial institutions with environmental standards, become involved it would make a mockery of their standards."

Sakhalin II has been billed as a key test of the Equator Principles – environmental and social lending principles. Shell has not met their own policies but now expect others to fund the project and share its excessive risks. Signatories of the Equator Principles, such as ABN Amro and Royal Bank of Scotland, should have their eyes wide open before they get involved in this project.

Despite Shell stating that EIAs should be carried out prior to all new activities and developments, many critical areas of Sakhalin II project are still being assessed half-way through construction. This prevents mitigating action being included into the project. Investors will inherit the risks that Shell has built into Sakhalin II, and will be powerless to influence the outcome.

"Given the irreversible environmental and social impacts from the ongoing construction you would hope that Shell would act responsibly," said James Leaton, WWF-UK's oil and gas policy officer. "It seems as if Shell is retrospectively trying to complete their EIA simply to meet the EBRD's funding requirements, rather than address the problems."

"I doubt that Shell would have shown such disregard for the environment and social upheaval if this development was happening in the UK. But half way around the world on a remote island the story is different. This project does not bode well for similar locations in the Arctic where Shell has expressed an interest such as the Barents, Bearings and Beaufort seas, all of which are important regions for wildlife and fisheries," he added.

To minimize its impact Shell needs to halt work on the project and undergo a rigorous reassessment. However, Shell needs to recognize that irreversible damage has already been caused as a result of not following their own guidelines.

END NOTES:

• The report took environmental impact assessment information provided by Shell and assessed it against Shell's global standards, which are equivalent to EBRD's Environmental Policies.

• Fishing resources on Sakhalin, an island the size of England, are also being destroyed. In Aniva bay, where Shell is dredging as part of its liquified natural gas terminal, fishing catches are being decimated. In the 2005 season a local fishing company reported staggering reductions in their catch. Salmon spawning areas, important to indigenous communities, have already been destroyed by Shell's activities. A third of the 533,000 population rely on fishing for their livelihoods.

• Despite the EBRD calling for a more strategic plan – a Strategic Environmental Assessment – in 1999 none has been conducted. Its absence on a project the equivalent of constructing a pipeline the length of the UK, with two major facilities at either end has led to increased damage. Instead of sharing the infrastructure Shell is running a pipeline north-south on Sakhalin and ExxonMobil is running one east-west. Sharing facilities could have helped to reduce costs, on a project with a $10 billion overspend.

•The Sakhalin II Phase 2 offshore oil and gas project is a proposed US$20 billion project on Russia's Pacific Coast. The project is being led by Shell, as the major shareholder and operator of the Sakhalin Energy Investment Company, (the other shareholders are Mitsui and Mitsubishi). It proposes the construction of a new oil and gas platform, offshore pipelines, onshore pipelines carrying oil and gas the 800 km length of the island, and the construction of a liquid natural gas (LNG) production plant and LNG terminal at the south end of the island.

• Sakhalin is an important habitat for Steller sea lions, Steller's sea eagles and another 10 endangered migratory bird. It is also the home to the last 100 western gray whales. An international panel of experts is critical of Shell for failing to take into account the cumulative impacts on whales of various activities such as ship strikes, oil spills, noise and damage to their feeding grounds.

For further information:
Anthony Field, Senior Press Officer
WWF-UK
Tel: +44 1483 412379
E-mail: afield@wwf.org.uk

Risky Business - the new Shell

2005-11-25

The importance of Environmental Impact Assessment (EIA) is recognised by communities, companies, banks and governments. An effective process can deliver environmental, social and financial benefits.

PROCESS:
This report has compared the EIA process undertaken by Shell on the Sakhalin II project with Shell's own group manual on EIA. The application of Shell's own EIA procedures has been found to be seriously lacking, with examples and evidence provided from a range of sources. This issue of sequencing is key if maximum environmental protection is to result, otherwise opportunities to change designs are lost. In this case, Shell has made decisions first, and then sought to justify them through the EIA process.

THE BIGGER PICTURE:
Despite an indication that a Strategic Environmental Assessment was required, the lack of strategic planning on Sakhalin is resulting in damaging infrastructure development. Shell did not take into account social and environmental interactions, which is impacting on fisheries, the heart of Sakhalin's economy. Damage has already emerged, with much smaller catches in Aniva Bay in 2005.

SCOPING:
Shell has been in denial of the breadth and depth of scope of EIA required for Sakhalin II, despite stakeholder input. The baseline data underpinning the Sakhalin EIA is not fit for purpose. This is evident in terms of poor data on trans-boundary species, obvious limitations in understanding of the Western Gray Whale, and the failure to recognise indigenous communities. Shell has failed to incorporate environmental information into decision-making and conduct a valid, early assessment of alternative project designs. In particular it is clear that environmental aspects were not considered in choosing the platform location, and no alternative options have been offered.

DIALOGUE:
Shell has had ample chances to alter the project, but has chosen its construction timetable over environmental protection. Shell has handled consultation so badly to date, it has already seriously damaged relations and trust with key stakeholders. This has manifested in concerned groups taking out adverts in international newspapers to convey their dissatisfaction at Shell's actions. Shell's continuing attempts to supplement the EIA constitute a paper compliance exercise which cannot involve meaningful consultation. There is so little left to consult on at this stage, any process claiming to be consulting on the whole project would be considered flawed.

IMPACT ASSESSMENT:
Shell is ignoring the fact that many of its impacts should be classified as of major significance. Even where the EIA indicates issues, Shell has only sought to reduce the emphasis placed on them, rather than address the problem. Worst case scenarios have not been considered in the analysis, skewing the picture to the positive. It appears Shell considers that significant impacts on a critical habitat of an endangered species are acceptable, ignoring the views of a panel of world experts and other stakeholders. Investigation of the implications of this flawed EIA shows that it is already contributing to negative impacts on the environment and local people. This has already resulted in Gray Whales being exposed to unnecessary risks and unknown impacts, whilst salmon spawning areas have already been destroyed.

Shell has not used rigorous quantitative assessments and modelling to predict the expected impacts and the effectiveness of its proposed mitigation measures. This is evident in terms of the noise the whales were exposed to during construction in Summer 2005. Shell exceeded the levels required by the eminent, independent panel of experts, on a repeated basis.

BIODIVERSITY:
The company's recognised biodiversity implementation gap is at its widest in Sakhalin, with no indication key issues were included in the early decision-making processes. Shell is putting its own credibility and reputation at risk, as will any institution associated with the project. Shell is heading for having the extinction of a species of whale on its record. Shell has not taken a sufficiently precautionary approach to guarantee it will not impact upon endangered species. International cetacean experts have stated clearly that more could have been done to reduce risks to the whales. Shell's actions are contradictory to local regulations and International biodiversity commitments.

MITIGATION:
Shell is not giving sufficient significance to the importance of the biodiversity in Sakhalin, with the focus on process rather than conservation outcomes. The overreliance on mitigation rather than prevention has caused Shell to come unstuck. Shell has not incorporated impact criteria into operational procedures to prevent significant impacts occurring. This is an example of the gap between clear statements of expected impact, and Shell delivering appropriate mitigation measures. In some cases the mitigation is ineffective (e.g. observers who cannot operate in the conditions present), in others it is not implemented (e.g., contractors failing to apply erosion control measures), whilst in a few it is non-existent (e.g. no recognised technique to clean up oil spills in ice).

IMPLEMENTATION:
In terms of specific issues, Shell refused to wait for the best scientific advice before installing the platform base. Also, Shell has not acknowledged the importance of many of the salmon streams for spawning, and as a result cannot develop appropriate crossing techniques and mitigation measures. Shell has been exposed as having an over-reliance on contractors, which has manifested itself in unacceptable practices on Sakhalin river crossings. Shell did not reduce the risk of collisions with its mitigation attempts during its construction this summer.

CONCLUSION:
Shell's denial is already resulting in irreversible impacts on the biodiversity and natural resources of Sakhalin Island. This is having a negative effect on the standards practised in Russia, given that local companies are applying better standards on projects elsewhere in Russia.

It also does not bode well for Shell aspirations in other similar locations in the Arctic. Shell has shown interest in the Barents, Berings and Beaufort Sea, all WWF priority Ecoregions. The same issues of whales, ice, fisheries and local communities will face Shell in these locations, but on this evidence they are not equipped to deal with it.

Shell has set its own standards on EIA, which are aligned with World Bank requirements. It is clear the company has not applied this process satisfactorily, to meet any international standard. If financial institutions claiming to have meaningful standards get involved in the project at this late stage it will make a mockery of their standards too.

The European Bank for Reconstruction and Development has a responsibility to tell Shell the Sakhalin II project does not meet its policies; this is the only way Shell will get the message it has to change.

What cost a species?

2005-07-29

London, UK – Shell's second quarter results show an income of $5.2 billion, but ignore the social and environmental cost of their exploration, in particular around the island of Sakhalin in Russia's Far East, and the impact on the critically endangered western gray whales that could be driven towards extinction by the project.

In the last two years Shell has down graded their oil reserve estimates and admitted a doubling of cost in developing their flagship Sakhalin II liquefied natural gas project, a $10 billion overspend, as well as severe delays.

WWF-UK believes that following on from these calamitous years Shell has been profit focused and has shown little regard for responsible environmental or social development on Sakhalin.

"Shell is bulldozing through the Sakhalin project with little regard for their social and environmental impacts," said Robert Napier, WWF-UK's Chief Executive.

"Their Sakhalin project has the very real risk to drive the western gray whale towards extinction according to an independent study conducted by leading whale scientists. It has also caused untold damage to many important salmon spawning streams resulting in local communities protesting and blockading roads. Yet Shell continues to forge ahead."

International banks have not backed the Sakhalin II project and the European Bank for Reconstruction and Development (EBRD) has still not approved the project which it has described as 'unfit for purpose' due to environmental concerns in June this year. In addition to the EBRD, WWF is calling on other potential investors, as well as Equator banks not to back Sakhalin II. The Equator principles are a set of voluntary social and environmental guidelines covering project financing of over $50 million.

"In addition to the high financial risk, banks are also in danger of tarnishing their reputation by backing the Sakhalin project, with all its associated environmental and social impacts," added Napier.

"If Sakhalin is one of the 'elephant' projects announced by Shell's chief executive Jeroen van der Veer last month then based on current evidence the world will have to suffer a lot more damage in the future."

Shell announced an increase in its exploration expenditure for 2005 and 2006 as they explore in more and more remote and environmentally sensitive places in the world. WWF-UK warns Shell that the high environmental impacts and risks on Sakhalin must not be repeated in two equally remote areas in the near future – the Barents Sea (North of Russia) and Beaufort Sea (North of Canada).

For further information:
Anthony Field, Press Officer
WWF-UK
Tel: +44 1483 412379
E-mail: afield@wwf.org.uk

No wins for Japan but whales still losing

2005-06-24

Ulsan, Republic of Korea – Five days of gridlock and political posturing at the International Whaling Commission stymied conservation efforts and was unable to halt the advance of Japan's so called "scientific whaling".

Despite Japan's defeat on three major votes, it has announced it will expand its whaling in Antarctica and take 50 endangered fin whales, 50 humpbacks, and double its quota of minke whales to 850.

"Despite cheers by some, and rhetoric in the media, this is no great cause for celebration," said Dr Susan Lieberman, Director of WWF's global species programme.

"Japan continues to do as it wishes in the name of bogus science and the world stands by and applauds. It is time to reform the IWC."

Japan stated at the interantional whaling meeting that it would win a vote of support for its science next year. This is clearly a sign it will continue to recruit new countries to vote with it.

This year, the number of countries that voted for conservation was neck and neck with the pro-whaling bloc. Swing votes on key issues, or further abstentions, would have given the pro-whaling bloc the majority.

Japan tried to abolish the Southern Ocean whale sanctuary, but was defeated. Brazil, Argentina, and South Africa tried to establish a South Atlantic Sanctuary, which was then defeated by the pro-whaling bloc.

Should Japan and its allies finally achieve the majority, there are clear signals that next year they will abolish the conservation committee tasked with looking at ship strikes, bycatch (incidental catch in fisheries nets) and other threats, including climate change. They would also strike whale watching, sanctuaries, and environmental and health issues from the agenda.

This year, a decision was taken dealing with the critically endangered West Pacific gray whale, which is threatened by oil and gas development off of Sakhalin Island in the Russian Far East.

The threat of bycatch to the vulnerable population of minke whales off the coast of Korea and Japan was also addressed, as was the issue of seriously contaminated gray whales in the Russian Arctic.

Other agenda items included dicussion on the IWC's revised management scheme (RMS), or rules governing commercial whaling, should it resume.

Japan's flawed proposal draft proposal was convincingly rejected. However, the IWC agreed to continue talks on this issue before the next meeting.

WWF welcomes a recommendation from several governments to reform the IWC in the near future, including a possible high-level ministerial or diplomatic level conference on key IWC issues.

"We call on the governments of the world who are committed to conservation to help strengthen and reform this institution," said Dr Lieberman.

"We are hopeful that a diplomatic negotiating conference could finally close the scientific whaling loophole, address other key conservation issues, and catapult a treaty that was negotiated in 1946 into the 21st century."

For further information:
Joanna Benn, Communications Manager
WWF Global Species Programme
Tel: +41 22 364 9093

Analysis of the Sakhalin II oil and gas project's compliance with the Equator Principles

2005-06-13

Executive summary

This report finds that the Sakhalin II integrated oil and gas project fails to comply with the Equator Principles on responsible lending.

The project is situated at Sakhalin Island in Russia's Far East, and is being developed by a consortium led by Shell. It will consist of three offshore platforms, offshore and onshore pipelines, an onshore processing facility, a liquefied natural gas (LNG) facility and oil and gas export terminal.

It will have severe environmental impacts, including threatening the critically endangered Western Gray Whale with extinction, damaging habitats of endangered bird and fish species, and polluting important fisheries. Experts have reported that the project design falls way short of industry best practice, and that its risk assessments are inadequate. As a result, the project risks causing a catastrophic oil spill, as well as major routine impacts.

Local and international environmental organisations have demanded substantial design changes, and Russian groups have initiated lawsuits against the project.

With a capital cost of at least $12 billion, the project is expected to seek project financing later in 2004. This report recommends that commercial banks do not finance the project in its current form.

20 leading commercial banks have now adopted the Equator Principles, established in June 2003, which commit the banks to not financing projects that fail to meet their environmental and social guidelines.

While environmental organisations have welcomed the introduction of the Equator Principles, they expect the banks to apply these Principles in good faith by not supporting damaging projects. Banks must carry out rigorous due diligence on projects, and demonstrate transparency by publishing their assessments of compliance with the Equator Principles.

Non-compliance with Equator Principles

As currently designed, the Sakhalin II project fails to comply with the Equator Principles. The project's environmental impact assessment (EIA) is deficient on a number of counts. These include, inter alia:

1. The environmental assessment fails to include key baseline data, including identification of specific information about endangered species that is prerequisite to adequate assessment of project impacts and to determination of necessary mitigation measures. These endangered species include the Western Gray Whale, Stellar's Sea Eagle, and Sakhalin taimen, masu salmon, and other wildlife species. Some of the baseline data conflicts with other expert reports (including on endangered birds and on significance to salmon of streams). (Breach of Equator Principle 3a).

2. The EIA fails to evaluate conflicts between the project Production Sharing Agreement and Russian environmental law, does not address legal challenges to the project, and is unclear about environmental protection status of Aniva Bay. (Breach of Principle 3b).

3. Key environmental impacts are omitted from the EIA, including the impacts on many wild salmon-bearing streams and the impact of oil spills. Other important impacts are inadequately analysed, such as those on the Western Gray Whale. Some mitigation measures are missing, flawed, or their effectiveness not substantiated, including mitigation of impacts on Western Gray Whale, and of seismic risks. (Breach of Principle 3d).

4. Cumulative impacts with other oil and gas projects on Sakhalin Island are not considered. (Breach of Principle 3m).

5. The EIA does not systematically compare the project with feasible alternatives. (Breach of IFC Safeguard Policy OP 4.01 (Environmental Assessment) - compliance with which is required under Principle 3).

The Equator Principles also require the EIA to assess the project's compliance with the World Bank's Pollution Prevention and Abatement Handbook (Principle 3). The EIA does not do this, nor does it provide sufficient information, in an appropriate form, for an external reviewer to assess compliance.

There are further problems in project design, which also constitute breaches of the Equator Principles:

1. The siting of the offshore platforms and the routing of the offshore pipeline will degrade the Western Gray Whales' summer feeding ground, a critical natural habitat. (Breach of IFC Safeguard Policy OP 4.04 (Natural Habitats), and hence Equator Principle 3).

2. The project fails to apply the precautionary principle in relation to Western Gray Whale feeding grounds, to watercourse crossings, or to dumping of wastes in Gulf of Aniva. (Breach of IFC Safeguard Policy OP 4.04 (Natural Habitats), and hence Principle 3).

3. Consultation processes were flawed, the project failed to provide sufficient information to stakeholders, and did not take consultees views into account. (Breach of Principle 5).

The Equator Principles also require production of an Environmental Management Plan (Principle 4), which is yet to be published.

Recommendations
Based on these findings, we recommend that banks take the following action:

1. In the absence of fundamental changes to the project, adopting banks should refuse loans to the Sakhalin II project.

2. Banks should carry out their own rigorous due diligence of the project, rather than relying on that of project sponsors or other financial institutions.

3. In order to establish trust with civil society, and in the interests of transparency, banks should publish their analysis of project compliance with the Equator Principles.

To download the full report, click here

Sakhalin II gas and oil project - Further Breaches of Equator Principles

2005-06-13

About the project

The Sakhalin II gas and oil project is located on Sakhalin Island in Russia's Far East, and is being developed by a consortium led by Shell. It will consist of three offshore platforms, offshore and onshore pipelines, an onshore processing facility, a liquefied natural gas (LNG) facility and oil and gas export terminal.

It will have severe environmental and social impacts, including threatening the critically endangered Western Gray Whale with extinction, undermining the livelihoods of indigenous peoples, damaging habitats of endangered bird and fish species, and polluting important fisheries. Experts have reported that the project design falls way short of industry best practice, and that its risk assessments are inadequate. As a result, the project risks causing a catastrophic oil spill, as well as major routine impacts.

Local and international environmental organisations have demanded substantial design changes, and Russian groups have initiated lawsuits against the project.

With a capital cost of at least $12 billion, the project is expected to seek project financing later in 2005.

The report

In May 2004, 39 civil society groups, from 15 countries, warned commercial banks of extensive and systemic violations of the Equator Principles by the Shell-led Sakhalin II project – violations which should preclude financing of the project by banks that have adopted the Equator Principles.

This update finds that, far from resolving those violations, events over the past ten months show a deteriorating situation, constituting further violations of the Equator Principles, and even more compelling reasons for Equator banks not to finance the project.

To download the full report, click here