WWF-UK wins funding halt to Sakhalin II oil and gas pipeline

News web pic 2_259.jpg
Lobbying by WWF UK to protect Arctic wilderness from a £11bn ($22bn) oil and gas project that threatened the Western Gray Whale with extinction has been successful after the UK and US governments withdrew backing.

The project involves building oil and gas platforms on and offshore of the Sakhalin island near the east coast of Russia, and a 800km pipeline to supply western markets.

For the past four years the Sakhalin II project led first by Shell and then by Gazprom has been subject to a fierce lobbying battle to deny it U.S. Export Import (Ex-Im) Bank and the UK Export Credit Guarantee Department (ECGD) financing.

The withholding of the financing greatly increases the political, financial and reputational risks of any other bank still considering financing the project, say environmental campaigners. Also, the withholding of financing sends a strong message to oil companies seeking approval and financing for highly risky projects in the Arctic region.

The project was heavily criticised for putting the last 120 Western Gray Whales under serious threat as well causing potential damage to wild salmon spawning grounds, and negative impacts to indigenous and fishing cultures.

WWF's James Leaton said, "Consistent failures on Sakhalin II provide a stark example of why oil companies shouldn't be allowed into vulnerable Arctic regions such as the U.S. Bristol Bay and Chukchi Sea."

He also said it should cause the government to review its methods.

"The Sakhalin II project has raised a number of issues around how ECGD conducts its business," Leaton continued. "It is imperative that ECGD reviews how it can prevent wasting resources on unsustainable oil projects, and ensure it contributes to Government commitments on sustainable development," he explained.

Some will see political as well as environmental motivation behind the UK and US refusal. Gazprom is widely seen as an operational arm of the Kremlin’s strategy to exercise political power through energy. The new Russian president Dmitry Medvedev was once its chairman.

This article first appeared in the Ecologist March 2008