The EBRD has canceled plans to provide loans to Russia's Sakhalin-2 oil and gas project now that state-run OAO Gazprom will become the major shareholder in the $20 billion (€15.4 billion) venture.
The European Bank for Reconstruction & Development (EBRD) said it would no longer consider funding the project it has worked on for the past five years due to the „material change” in the nature of the investment. The bank would be open to financing the project in future if the new owners approached it and made a new case for funding. OAO Gazprom, Russia's gas export monopoly, agreed last month to buy a 50% stake in the venture on Sakhalin Island, in eastern Russia, from foreign partners Royal Dutch Shell Plc, Mitsui & Co. and Mitsubishi Corp.
”We cannot consider any longer the project we have been considering,” EBRD President Jean Lemierre told reporters in London yesterday. „We do not know what are going to be the views of Sakhalin under the new structure.” The EBRD, set up by western governments in 1991 to help build market economies in eastern Europe and former Soviet states, was already under pressure from environmentalists who say the project's impact on salmon and whales, and other environmental, social and safety matters, make it unworthy of a proposed loan of about $300 million (€231 million). Around 80% of EBRD loans are to private sector enterprises, with Russia the bank's biggest debtor. The ERBD it will increase the amount of money it loans to Russian companies next year despite pulling out of Sakhalin-2, Lemierre said.
The Hague-based Shell and Japanese partners Mitsui and Mitsubishi will own 27.5%, 12.5% and 10%, respectively, once the equity sale to Gazprom is complete, probably by the end of next month. The project, now 80% complete, is building 800-kilometer pipelines to carry oil and gas from ice-choked offshore platforms to a site that will house Russia's first export terminal for liquefied natural gas.
The deal bolsters President Vladimir Putin's control over Russia's energy industry and ends a yearlong campaign in which the government threatened to cancel building permits on environmental grounds and refused to approve project budgets. The EBRD has been monitoring the project since 2002 as part of its due diligence process, including holding public consultations on Sakhalin Island last year. EBRD backing would make it easier for state-owned credit agencies and commercial banks to provide another $7 billion (€5.3 billon) in credit, though Shell says the project will proceed with or without EBRD funding. (Bloomberg)