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Letter to JBIC and EBRD: "Financing for Phase 2 construction of Sakhalin II Oil and Gas Development Project"

December 15, 2003

Mr. Jean Lemierre, President
European Bank for Reconstruction and Development

Mr. Kyosuke Shinozawa, Governor
Japan Bank for International Cooperation

Re: Financing for Phase 2 construction of Sakhalin II Oil and Gas Development Project

 We understand that your institutions are now conducting environmental assessments for loans to the Sakhalin II oil and natural gas development project (hereinafter Sakhalin II). We believe that environmental and social considerations by the Sakhalin Energy Investment Company (SEIC), the lead entity in the project, are seriously inadequate. In this statement of opinion we summarize the present problems, including the results of meetings in Tokyo and Sapporo between SEIC and Japanese parties in late September, and describe some measures needed to remedy the situation before any decision on financing is made (please see Appendix 1for details).

 Normally, environmental and social considerations and protection measures should be given equal priority to the economic and financial aspects of a project, and the project should be developed after discussions with stakeholders under conditions of proper information disclosure, right from the early stages of planning. SEIC has left these "on the back burner" in the case of Sakhalin II, however. While the project itself is moving forward rapidly, there has been no progress with the necessary information disclosure, consultations with stakeholders, and establishment of environmental measures.

 Moreover, we are forced to question the very character of SEIC itself, based on our dealings with it so far. The performance of SEIC has served only to undermine any trust that may have existed. For example, (1) it appears that SEIC documentation may contain data that has been manipulated only to support its environmental assessment report and justify the project; (2) SEIC has failed to provide supplementary explanations about the incomplete environmental and social impact assessments and delay in establishing measures for the whole ecosystem; (3) despite promises made, SEIC has ignored requests by Japanese citizens for information regarding the project and consultations; and (4) SEIC has rejected requests to permit audio recording of meetings for the sake of keeping an accurate record.

 We believe that SEIC has not behaved in a manner suitable for an entity that is to receive financing from public funds. We are highly concerned about the potential that the project will cause serious and irreparable damage to natural and human environments, including destructive impacts on endangered wildlife and marine resources, leading to impacts on human livelihoods.

 The responsibility for impacts of a project lie not only with the project entity, but also with the financing institutions that support the project. We urge you not to end your environmental assessments of the project and or make any decision in favor of financing the project under the current circumstances of SEIC's inadequate environmental and social consideration. Moreover, we request that you as financing institutions make efforts to ensure that the appropriate measures for environment and social consideration are established and implemented, based on proper processes.

 A number of environmental issues have been raised since the first phase of the project. SEIC has not yet resolved most of them. The second phase of the project will likely add environmental risks to the unresolved issues. We urge you again not to make any decision regarding financing for the project as things stand. As organizations that have closely followed the Sakhalin oil and gas developments for years, and aiming to ensure that all development is socially and environmentally sound and sustainable, we appreciate your consideration of our concerns. We would be happy to provide you more information or cooperate in any way necessary to achieve those aims.


Naomi Kanzaki
Friends of the Earth Japan
3-17-24-201 Mejiro, Toshima-ku,
Tokyo 171-0031
TEL: +81-3-3951-1081
FAX: +81-3-3951-1084



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