#23 - JRL 2006-212 - JRL Home
Moscow News
www.MN.Ru
September 22, 2006
Sakhalin: Yet Another PR Blunder
By Marina Pustilnik
Just two weeks ago I wrote about Rosprirodnadzor threatening to recall the development license for Sakhalin-2 oil and gas deposit from Shell-led consortium of investors that develops one of Russia's three remaining production sharing agreements. The environmental watchdog was citing grave environmental violations as the reason for a license recall, while Western observers were discussing how such a move would possibly affect all foreign investment in Russia. I wrote then that the authorities have to stick to these agreements no matter what, because of all the scrutiny and (often) subjective criticism encountered by Russia. Well, I could not really expect that someone would listen, could I?
Last Saturday, the Prosecutor General's Office came out with a statement threatening to annul all three production sharing agreements, run by Shell, ExxonMobil and Total, on the grounds that they do not comply with original licensing agreements. On Monday, it was announced that the Natural Resources Ministry decided to annul the results of an environmental probe that was done at Sakhalin-2 project in 2003. Shell and two Japanese companies, Mitsui and Mitsubishi, that run the project were accused of a failure to build anti-erosion facilities and of excessive discharge of industrial waters from the Molikpaq offshore platform. The environmental watchdog has also said that Sakhalin Energy, which runs the project, had failed to submit timely reports on all prospecting and geological work.
If a court upholds the service's demands, all activity under the Sakhalin-2 project will be prohibited until the state ecological probe issues a revised conclusion and all environmental violations are eliminated. This may seriously hamper Sakhalin Energy's ability to fulfill its contracts as the project was supposed to enter its full operational capacity by 2008. Japanese utilities in particular count on supplies of liquefied natural gas from Sakhalin and the country's would-be Prime Minister Shinzo Abe already warned that delays in the project could harm relations between Russia and Japan.
And now, here is the catch. I am more than sure that all of the environmental problems, listed by Rosprirodnadzor and Natural Resources Ministry, really do exist. After all, earlier this year environmental concerns prompted the European Bank of Reconstruction and Development to withhold a loan for a pipeline that Sakhalin Energy had been building from its offshore platform. EBRD is known to check all of the projects it credits for correspondence with environmental protection norms, and so as they say "there is no smoke without fire." Moreover, Russia has all the rights to try and protect its environment from unprincipled users. All of these are valid arguments.
The problem is not the validity of the arguments. The problem is that Russian authorities are once again demonstrating preferential justice. If the Sakhalin-2 project was ridden with environmental problems all these years, why was it given approval in 2003 and why wasn't this approval recalled until this week? Despite hiring a US PR firm, Russian authorities still haven't come to terms with PR strategies.
In this hostile world, if you are right, it's not enough to stand up and say "I am right!" - you have to prove it with documents and figures at your fingertips. Instead of proving their position and offering a possibility to work things out, Russian authorities once again have everyone at their backs, accusing them of arbitrariness, inability to keep their word, violation of international agreements and greed. Some things just never change. Some people just never learn.