Sakhalin II
The Sakhalin II oil and gas project is a US$20 billion project on Russia's Pacific Coast. When completed, the development will consist of new oil and gas platforms, offshore and onshore pipelines, a liquid natural gas (LNG) production plant and an oil & LNG terminal.
Sakhalin Energy Investment Company (SEIC) is the consortium responsible for the project and consists of Shell (the project operator); Mitsui; Mitsubishi; and Gazprom (the majority shareholder since 2006).
The initial environmental, social and health impact assessment (ESHIA) carried out by SEIC, to look at the potential impacts of the project and consider alternative options and mitigation measures, was rejected by the potential lenders in 2004 as 'unfit for purpose'. SEIC was required to provide additional information which was submitted in 2005. Despite this, construction on the project began in 2004, before the assessments had been adequately completed.
An independent review of the revised ESHIA makes it clear that a range of impacts were not identified by SEIC before construction started and that there are still impacts that have yet to be adequately identified even though construction of the project is now almost complete.
As a result, the Sakhalin II project has already caused serious environmental damage. Of greatest concern is the impact on the Western Pacific Gray Whale, whose global population now numbers just 120 individuals. The new platform has been constructed close to the feeding grounds of this critically endangered species and SEIC has ignored guidance from an international panel of whale experts on acceptable levels of noise during construction. In addition, two other endangered species are also under threat from the project – the Steller's Sea Eagle and the Taimen (a type of salmon).
SEIC has not implemented many of the proposed mitigation measures to avoid impacting these and other forms of biodiversity. For example, the recommended 500m exclusion zone around the Steller's Sea Eagles nesting sites was reduced to 350m by SEIC in order to avoid the inconvenience of rerouting site traffic.
ECGD and Sakhalin II
In 2002, SEIC approached ECGD for support of the Sakhalin II project, involving financial guarantees totalling some $650 million. Given the size and type of the Sakhalin II development, it is categorized as a high impact project. Therefore, according to ECGD's own policies, environmental and social impact assessments must be carried out before it can receive ECGD support.
In a letter from ECGD to SEIC dated 4 March 2004 (disclosed in June 2007 as a result of a Freedom of Information request) ECGD gave a legally-binding commitment to support Sakhalin II subject to certain conditions. This commitment was given prior to environmental and social impact assessments being completed.
In response to the release of this letter WWF decided to bring a court case, with co-claimant The Corner House, challenging the legality of the decision to give a conditional commitment to support Sakhalin.
The secrecy surrounding the decision to support Sakhalin is characteristic of the lack of transparency in ECGD's procedures and decision-making processes.
Read more about WWF's legal action.
On 3rd March 2008, WWF learnt that SEIC had withdrawn its application for support from ECGD. It is clear that this was in part due to the pressure generated by the WWF campaign and legal case. While WWF is pleased with this decision it still leaves the issue of reform of ECGD unresolved.
Sakhalin comes at the end of a long line of projects ECGD has supported which have resulted in both more carbon emissions and the loss of precious habitat. That's why ECGD needs to be reformed. It needs to be properly accountable for the decisions it makes - accountable to parliament. And it needs to disclose the full carbon impact of all the projects it supports, many of which will result in a massive increase in global carbon emissions.
That is why, in working towards a One Planet Future, we are campaigning to reform ECGD. Outside the High Court our campaign is focussing on parliament and the Department for Business Enterprise and Regulatory Reform (DBERR). Find out more about our political campaign.