Rich Cookson’s final blog from Sakhalin:

“The VIP lounge at Yuzhno-Sakhalinsk airport is packed with Russian politicians and foreign oil workers. Russia’s First Deputy Prime Minister Dmitry Medvedev – the man tipped to be the next Russian President – is visiting the liquefied natural gas (LNG) plant in the south of Sakhalin today.

His delegation includes one of Vladimir Putin’s top aides, Aleksandr Beglov, Presidential envoy in the Russian Far East Kamil Iskhakov and Sakhalin Governor Ivan Malakhov. They are met at the LNG plant by Christopher Finlayson, Shell Russia Country Chairman and Sakhalin Energy chairman of the board of directors and Ian Craig, Sakhalin Energy CEO.

But at a table in the corner of the lounge sits Dmitry Lisitsyn, chairman of Sakhalin Environment Watch – one of the most vocal critics of the Sakhalin II. “The project now has very little support among ordinary people because they can see that the promises made by Shell are not a reality,” he says. “Everybody believed that we would use gas from the offshore fields. At the moment we are using coal for our power-station. There’s no railway to the coal mines, so it’s taken by trucks on very bad roads. It’s also very expensive, even though we are extracting it here.” The coal-fired power-station at Yuzhno is also a major cause of pollution.

“Our governor and the oil companies promised us that when the Sakhalin II project started to produce gas, the snow in the city would be white. But now people realize that it will be several years before that happens. Shell promised so much, but can’t meet its promises.”

He talks about the impact of the project on all aspects of life on Sakhalin: the overloading of medical facilities in towns which have housed foreign workers; the damage that heavy construction traffic has done to the island’s roads; the impact of the onshore gas and oil pipelines on salmon spawning grounds in rivers.

“There are small communities of people who live traditional lifestyles on the island,” he says. One of them are the Nivkhy people, who depend heavily on fishing. “In one case – at a village called Veni – a pipeline was constructed across the Veni river, which is very important as a source of fish. Immediately after a road was constructed across the river, at the beginning of 2005, the fish disappeared”.

“Sakhalin Energy had created a bridge with logs and soil, but didn’t remove it, so when the ice melted, all the material went into the river and blocked the migration of the fish. People in the village had to remove the logs themselves, but couldn’t remove all the soil. They tell us that there has been almost no fish in the river until now…”

The economic benefits of the project to the people of Sakhalin are also now very much in doubt. Shell’s own briefing admits that a 6 per cent royalty charge on selling gas and oil was initially to be split so that 60 per cent went to the Sakhalin region and 40 per cent to the central government. But in 2004 that was changed, so that the region would receive just 5 per cent.

Lisitsyn says that changes to rules governing the taxes paid by SE and its contractors have also dramatically reduced the economic benefits to the islanders. In a letter to the public finance institutions considering loans to the project, written last year, Lisitsyn stated, bluntly: “Sakhalin Island has been absolutely deprived of and all income from this project.”

He says: “The money was a very big reason why people here supported Sakhalin II – they expected bug incomes.” He describes the changes in the tax systems and impact of the agreement as a “disaster for Sakhalin”. ENDS

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