Friday 8 September 2006

Shell holds the majority share (55 per cent) in the project. However it is not the quantity of money that is the contentious issue but the environmental and social credibility that the EBRD should bring to the project if they fund it. Sakhalin II has already seen a 100 per cent cost overrun meaning the total has spiralled to over $20 billion at the last estimate.

The EBRD admit that the project has already breached a number of its policies and the construction is being driven by a completion timetable rather than overcoming the difficulties encountered through good engineering solutions. Indeed if the pipelines were being built in the UK the standard of construction and regard for the environment is such that there would be the equivalent of a Twyford Down protest the length of Britain.

The project is now over 80 per cent complete, yet Shell is still seeking financing for it. Shell clearly has the money to complete the project without the need for finance. Potential lenders continue to claim they are trying to influence the project. Yet they have not been able to resolve many of the problems before construction advanced, and even where issues such as river crossings are well documented, they have not been able to deliver international standards.

It is too late for any potential lender to rescue the environmental impacts of this project. If the European Bank for Reconstruction and Development (EBRD) or the UK's Export Credit Guarantee Department (ECGD) lend money they will be inheriting all the problems of a flawed design and a poor implementation.