An oil and gas project, which will be part-funded by UK tax-payers, and which threatens the feeding grounds of the last 100 Western Gray Whales, looks set to proceed following the controversial approval today of an environmental impact assessment. Friends of the Earth has greeted today's news with dismay.

The European Bank for Reconstruction and Development (EBRD) announced today that the environmental impact assessment for Shell's mammoth oil and gas project at Sakhalin Island (Sakhalin II) in the Russian Far East has been approved [1]. The move paves the way for a $300 million public loan - including money from UK taxpayers - from the EBRD to the Shell-led consortium, the Sakhalin Energy Investment Company (SEIC) [2]. The costs of the controversial project have doubled, from $10 billion to $20 billion, and Shell has recently announced plans to expand production [3].

Friends of the Earth's New Economics campaigner, Mary Taylor, said:

"The decision to approve this destructive project shows that the EBRD's environmental policies have little value in the face of pressure from oil and gas interests. It is a scandal that UK taxpayers' money is being earmarked for a scheme that will lead to a massive increase in climate changing gases and which could push the Western Gray Whale into extinction. The EBRD should completely review its funding policies. Public money should be spent on projects that will protect the environment - not ones that destroy it."

Work has already started on the Sakhalin II project, the largest oil and gas project in the world. It involves dredging, drilling, pipe-laying and various construction operations in a particularly sensitive ecosystem.

The scheme, which has already provoked world-wide opposition:

Friends of the Earth believes that the project has run so far ahead that breaches of the EBRD's environmental policies - which include a "mandate to promote environmentally sound and sustainable development" - are irreversible [7].

NOTES TO EDITORS

1. Sakhalin Island is north of Japan and is part of Russian territory.

2. The UK is a major shareholder in the EBRD - Gordon Brown is the UK Governor, Hilary Benn the alternate.

3. Financial Times, 13 December 2005

4. Fishing forms a large part of the island's economy. One fishing company's lawyer has reported that their fish catches have fallen from 1478 tonnes in 2003 to 450 tonnes in 2005. [Email from Alexey Tyndik.]

5. For example, the consortium was fined for failing to conduct public consultation properly; the EBRD's own environmental policy states that it will seek to ensure that projects it finances "are environmentally sound, designed to operate in compliance with applicable regulatory requirements".

6. The review panel stated that; ""[E]xisting and planned large-scale offshore oil and gas activities pose potentially catastrophic threats to the population." They also pointed out that the additional loss of even one adult female could drive the population to extinction. The scientist, Prof. Richard Steiner, resigned when construction of a drilling platform (PA-B) near whale feeding grounds went ahead before the panel had finished its deliberations.

7. EBRD environmental policy states that "the EBRD will seek to ensure… that the projects it finances are environmentally sound, designed to operate in compliance with applicable regulatory requirements….". The word "environment" includes not only ecological considerations but community issues and impacts on indigenous peoples.