March 4, 2008
Press Advisory
Environmental Victory:
Sakhalin II Announces It Cannot Get Financing
from US and UK Export Credit Agencies
Sakhalin Environment Watch, Pacific Environment, WWF and other groups
celebrate Sakhalin Energy's abandoned attempt at public financing from
the United States and the United Kingdom.
Late yesterday Sakhalin Energy Investment Company, Ltd. (Sakhalin Energy)
told Dow Jones that it is withdrawing applications for hundreds of
millions of dollars in public financing for the crisis-plagued Sakhalin
II project from the US Export Import Bank (Ex-Im Bank) and the UK Export
Credit Guarantee Department (ECGD). This announcement is a triumph for
local environmental groups that have formed a coalition with national
and international environmental organizations to block billions of
dollars in public and private financing due to the chronic environmental
impacts of the project. Sakhalin II, the world's largest integrated oil
and gas project, located on and off-shore of Sakhalin Island in the
Russian Far East, has been plagued by environmental problems, including
threats to the critically endangered Western Gray Whales, damage to wild
salmon spawning grounds, and negative impacts to indigenous and fishing
cultures.
"We celebrate this tremendous victory," said Dmitry Lisitsyn, Chairman
of Sakhalin Environment Watch. "Since its inception over a decade ago,
Sakhalin II has committed severe environmental violations of these
public banks' policies. Every day new negative impacts are being seen,
including now in Aniva Bay, where project sedimentation is negatively
impacting our local scallop fisheries."
Dow Jones reported that Sakhalin Energy's decision to withdraw financing
was due to "serious concerns over possible delays" in financing.
However, Sakhalin Energy's statement neglects to mention that for five
years the company has been unable to secure billions of dollars in
public and private financing due in large part to the company's failure
to demonstrate compliance with banks' environmental policies. In 2007,
the public European Bank for Reconstruction and Development withdrew its
consideration for financing of Sakhalin II in large part because the
project could not demonstrate environmental policy compliance.
"This announcement demonstrates that the Sakhalin II project's environmental
problems are irreversible violations of the environmental standards of
these public banks," said David Gordon, Executive Director of Pacific
Environment.
In recent weeks, environmental organizations met with high level officials
in Ex-Im Bank and other US agencies amidst widespread rumors within the
government that Ex-Im Bank and possibly ECGD would cause the Sakhalin II
application to be withdrawn as a way to avoid having to officially
decline financing due in great part to environmental non-compliance.
"We are happy that Ex-Im Bank and ECGD ultimately did not support a
project that would compromise the integrity of their environmental
policies," said Doug Norlen, Policy Director, Pacific Environment. "But
the banks had a responsibility to state their rejection publicly, rather
than sneaking out the back door by asking Sakhalin Energy to withdraw
its application."
UThe withholding of Ex-Im Bank and ECGD financing for Sakhalin II greatly
increases the political, financial and reputational risks of any other
bank that has, or is still considering financing for the controversial
project, including the Royal Bank of Scotland, and the Japan Bank for
International Cooperation, respectively. Also, the withholding of
financing sends a strong message to oil companies seeking approval and
financing for highly risky projects in the Arctic region.
"Shell's consistent failures on Sakhalin II provide a stark example of
why oil companies shouldn't be allowed into vulnerable Arctic regions
such as the US Bristol Bay and Chukchi Sea," said James Leaton, WWF.
For more information, please visit Pacific Environment
https://www.pacificenvironment.org/section.php?id=63
For more information:
Doug Norlen, Pacific Environment dnorlen@pacificenvironment.org
David Gordon, Pacific Environment dkgordon@pacificenvironment.org
Dmitry Lisitsyn, Sakhalin Environment Watch sakhalinwatch@yandex.ru
James Leaton, WWF-UK jleaton@wwf.org.uk
