July 30, 2005

Fish protest forces Shell to delay oil terminal
By Malcolm Moore

Shell ran into another obstacle on its Sakhalin project yesterday after a Russian court ruled against the construction of a quay on the island.

The Sakhalin project, which aims to tap 4billion barrels of oil and gas under the frozen seas off Russia's east coast, has enraged environmentalists and is running 100pc over budget.

After agreeing to move a pipeline earlier in the year to safeguard a population of Pacific grey whales, Shell is now being accused of destroying local fish populations.

Pacific Environment, a green lobby group, said Shell and its partners had already begun dumping 71m cubic feet of dredging waste into Aniva Bay, in the south of Sakhalin.

"This is polluting delicate fisheries for crab, scallop, krill and sole. The bay provides a habitat for 25pc of the salmon caught on Sakhalin Island, where fish are a crucial part of the local economy," the group said.

The local court said Shell had not followed correct environmental procedures in getting approval for the jetty, which is being used by the company and its partners to load the raw materials needed for construction.

Russian newspapers reported that the court ruling had led to the suspension of work on a terminal to export liquefied natural gas (LNG) from the island. However, sources in Sakhalin said work was continuing.

The terminal in Aniva Bay is expected to be the largest in the world, and will export LNG to Japan and Korea. Sakhalin will eventually provide 10pc of Japan's gas needs. Shell has won environmental approval for the LNG terminal itself.

A spokesman for Shell declined to comment on the judgment, saying that the company would wait for the written judgment to be handed down.

The European Bank for Reconstruction and Development is mulling over whether to continue lending money to the project, in the face of furious environmentalists who have taken full-page newspaper advertisements to protest against Shell.

Mohammad Rafiq, who co-ordinated an independent environmental review into the Sakhalin project by the World Conservation Union, said: "This would not be inconsistent with the independent review. We said there were lots of gaps in the information."

Analysts in Russia said the technical hold-ups in the project, which have pushed back the date when Sakhalin will begin exporting LNG, could have been the fault of rival companies, who are seeking to delay shipments from Sakhalin to the Far East.