For Immediate Release: November 7th, 2007
Contact: David Gordon, Pacific Environment, 415-399-89850 x 301
dkgordon@pacificenvironment.org

Sakhalin Energy PR Misrepresents Report Findings

Sakhalin Energy PR misrepresents report findings:
Widespread non-compliance revealed in consultant report on Sakhalin II

An environmental consultant report to potential public lenders to the controversial Sakhalin II oil and gas project in eastern Russia[1] reveals a much higher level of non-compliance than represented by project sponsors, according to an independent critique by Pacific Environment and Sakhalin Environment Watch.[2]  At an October 8, 2007 Moscow press conference, the project operator, Sakhalin Energy Investment Company Ltd. (Sakhalin Energy), claimed that the AEA report gives Sakhalin II a “clean bill of health.”[3] However, the report, issued to appease lenders’ concerns over Sakhalin II’s history of environmental degradation, documents regular violations of social and environmental standards.  

“The AEA report reveals a much higher level of chronic non-compliance with the policies of the lenders than Sakhalin Energy claims,” said David Gordon, Executive Director of Pacific Environment.  “Sakhalin Energy simply misrepresented the findings of the AEA report.”  

The AEA report documents Sakhalin Energy’s repeated and widespread failure to adequately assess impacts and implement necessary mitigation measures before unacceptable and preventable negative environmental damage had already occurred, particularly with regard to endangered whales and wild salmon.  

“The AEA report confirms what prior lender consultants and external NGOs have known for years—that Sakhalin II is characterized by a history of environmental violations and subversion of the environmental assessment process,” said Dmitry Lisitsyn, Chairman of Sakhalin Environment Watch, the leading local environmental organization on Sakhalin Island.

Pacific Environment’s critique of the AEA report identifies several flaws in the quality and approach of the AEA report, including the fact that the report was paid for by Sakhalin Energy itself.  Pacific Environment also identified stark incongruity between some unfounded phrases in its Executive Summary and the findings contained deep in the 300+ page report.

“Sakhalin Energy points to throw-away phrases in the Executive Summary that are unsubstantiated in the report’s subsequent analysis.  The devil is in the detail of the 300- page report,” said Doug Norlen, Policy Director of Pacific Environment.  

The AEA report also reveals Sakhalin Energy’s continued undermining of environmental initiatives, including the company’s unwillingness to provide required timely information to external experts, such as the Western Gray Whale Advisory Panel (WGWAP). WGWAP conducts reviews required by potential lenders. Along with Sakhalin Energy’s unwillingness to follow all reasonable recommendations of the WGWAP and other experts, this represents irreversible violations of contractual conditions set by potential lenders. 

Based on their review of the AEA Report, Pacific Environment and Sakhalin Environment Watch renewed their calls that public and private lenders considering financing for the project.[4]  must decline financing for Sakhalin II. 

“The AEA report demonstrates once and for all that financing the Sakhalin-II project would mean that these banks would immediately breach their environmental and social policies,” said David Gordon, Executive Director of Pacific Environment.

Notes:

1.  Sakhalin II includes offshore oil and gas platforms, subsea pipelines, 800 kilometers of on-shore pipelines, one of the world’s largest liquid natural gas plants, and oil and gas tanker export terminals.  Over 90% constructed, at cost of over $20 billion, Sakhalin has been said by project sponsors to be the largest integrated oil and gas project in the world. 
2. Pacific Environment’s critique, entitled, Material Breach:  A Review of AEA’s Independent Environmental Consultant Final Report to Agency Lenders Regarding Sakhalin II Phase 2, is available at http://pacificenvironment.org/downloads/Material%20Breach%20-%20Review%20of%20AEA%20Report(7)(b).pdf
3. AEA Technology is a UK-based environmental consulting firm.  Its report, entitled, AEA Technology plc, Independent Environmental Consultant Final Report – Agency Lenders, Sakhalin II Phase 2 Project Health, Safety, Environmental and Social Review (2007), is available at http://www.sakhalinenergy.com/en/documents/iec_ddr2007.pdf
4. Public lenders considering financing for the Sakhalin-II project include Japan Bank for International Cooperation, Export Credit Guarantee Department (U.K.), and Export-Import Bank of the United States.  The European Bank for Reconstruction and Development, which previously had led the environmental review for the public lenders, has withdrawn its consideration of the Sakhalin-II project.