Chris Finlayson obviously likes a big challenge. Having been running Shell’s highly controversial operations in Nigeria, where the company has repeatedly been cited for environmental pollution and for being complicit in human rights abuses, he has moved to head up Shell’s operations in Russia.
Both Nigeria and Russia remain strategically important for Shell, but an article in yesterday’s Financial Times outlined the importance of its Sakhalin development off Russia’s east cost, that the paper labeled the “Mother of all projects.”
This is no small development – it is what is known within Shell as an elephant project because of its vast size. Two of the largest concrete structures ever built in Russia have been built as offshore platforms. They are fifteen stories high. There are 6,000 construction workers.
“This is the biggest single project certainly that Shell has and, by most measures, that anybody has,” Finlayson told the FT. The prize for Shell and Exxon Mobil, who also have a major project there, is an estimated 45 billion barrels of recoverable oil – more than the British, Norwegian and Dutch sectors of the North Sea combined.
Right from the start, though, Shell’s Sahkhalin-2 project has been beset by delays and massive increases in costs that have not been helped by the harsh climate and remote location. Half the year the island is under snow and temperatures can dip to -40 degrees Centigrade. It is also a typhoon area that is in an earth-quake zone. Predicted to cost $10 billion, the project will now cost $20 billion.
It is remote pristine places like this that Shell and the other oil companies are now forced to find our dwindling reserves of oil. Just think of the huge ecological and social cost of constructing an industrial oil and gas town in such a fragile environment. The region is also home to endangered gray whales whose population is only 100 and who feed off Sakhalin’s north-eastern shore. The pipelines also threaten salmon spawning in the pristine rivers.
This is the future of the oil industry. Every barrel of oil or tanker of gas will have a huge ecological impact. Many people believe it is a disaster waiting to happen. Seeing that ice is a major problem it is incredulous that the FT reported how “A bigger concern is that the company does not have a plan for what to do in the event of an oil spill under ice. It says it is working hard to come up with one”.
Just in case you think this has nothing to do with you, Liquefied natural gas from Sakhalin will be heading to the US when the project comes on-stream in three years time.