Eric Campbell visits the little-known Russian island of Sakhalin, the new frontier for an energy-hungry planet.
Once a sleepy outpost in a remote corner of the North Pacific, Sakhalin is suddenly at the centre of a massive energy boom.
Russia holds 27 per cent of the worlds natural gas reserves, and one of the worlds biggest integrated oil and gas projects is being built off Sakhalin, in sub-Arctic conditions.
It will be Russias first LNG plant, and when finished, will supply fuel to Asia, the US and Mexico.
Itll be a much-needed foreign currency earner for Moscow and many of the islands 600,000 inhabitants are benefiting from the job opportunities. But not everyones impressed, with some locals telling Foreign Correspondent that their islands wealth is being stolen.
All the money will go to the companies, and to Moscow
well only lose out from this project, says a local teacher. Originally the islanders were going to receive 40 per cent of the royalties now Moscow has decided to take it all.
But a spokesman for some of the multinationals involved says the foreign companies have invested heavily in the region. My company alone has invested $300 million in infrastructure upgrades such as roads and hospitals, so theres direct benefit from our expenditure, says Ian Craig, who heads a consortium of Shell, Mitsui and Mitsubishi.
Campbell reports that the region is prone to earthquakes and there are environmental concerns about potential oil spills. The companies say this has been taken into account in the design of the project.
Anatolys house and garden
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CAMPBELL: This, for Anatoly Vasilievic Vetrov, is a little slice of paradise.
Anatoly and friends
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CAMPBELL: For decades, he came here each weekend to build a country cottage on the Pacific coast.
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CAMPBELL: It was a place to savour nature, grow vegetables and enjoy life with his family.
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Anatoly Anatoly: I built roads, all by myself. And I built the house, all on my own.
Pan over garden to factory in distance Everything was good, until the factory.
CAMPBELL: Now Anatoly believes everything is turning bad.
Building works
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CAMPBELL: Behind Anatolys village, Russias first Liquefied Natural Gas plant is thundering into life.
Anatoly: With the construction of the factory all this dust and dirt started to come. Its very noisy, theres lots of noise. Thunderous machines are working, making more noise.
Anatoly We are all pensioners here. Im 64 years old, and so it creates inconvenience.
Building works
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CAMPBELL: It is part of a 20 billion US dollar project to exploit some of Sakhalins vast oil and gas reserves. 02:09
Pipeline being laid This remote Russian island has become the new frontier for an energy-hungry planet.
Craig in office Ian Craig heads Sakhalin Energy, a consortium of Shell and the Japanese companies Mitsui and Mitsubishi.
Craig: Its a huge project.
Super: Ian CraigSakhalin Energy Its one of biggest integrated oil and gas projects in the world. Were installing two new platforms, 1,600 kilometres of pipeline, the first LNG plant in Russia, all in one project, so the scale of it is quite daunting.
Building works
CAMPBELL: Projects like Shells should bring untold wealth to the island. It will tap two new fields off Sakhalins northeast coast, in waters that freeze over for six months of the year.
To ensure year-round exports, its building oil and gas pipelines down the entire length of the island to the ice-free port of Korsakov, where an LNG plant and loading terminal will send the fuel to Asia, the US and Mexico.
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CAMPBELL: But for many islanders in this erstwhile Soviet outpost, it is like an alien invasion.
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Woman: Why are they constantly stealing from us? Our government steals from us, now foreigners are stealing from us.
Historical photos.
Sakhalin
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CAMPBELL: Sakhalin has rarely been a welcoming place. It began life as a Tsarist penal colony. The writer Anton Chekhov called it hell. From 1905 half the island was occupied by Japan. After 1945, it became a Cold War military frontier.
File footage.
Grieving relatives
The last time it was in the news was 1983, when the military shot down a Korean passenger jet that strayed too close, killing 269 souls.
Lenin mural
Until recently, most islanders liked their closed world just the way it was. In the latter years of the Soviet Union
Sakhalin buildings
this was a relatively prosperous part of Russia. People were encouraged to settle here with high salaries to populate the area and to work in the timber and fishing industries. That all ended in 1991 when the Soviet Union collapsed. Suddenly people lost their jobs, their savings were made worthless by hyperinflation, and Sakhalin was left to wither on the Russian vine.
Medivoda and Campbell in classroom
For schoolteacher Alla Medivoda, its meant trying to educate children with nothing but determination.Medivoda: We dont live, we just survive. For a start, there is no funding to the school.
Medivoda
We do repairs with our own resources, thanks to the help of the parents - if the parents agree to help. Otherwise the school would have fallen to pieces. There is absolutely no funding from anywhere.
Oil rigs/tankers/pipelines
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CAMPBELL: Enter the Western oil giants.
As Soviet isolation ended, companies like Shell and Exxon-Mobil came with multi-billion dollar proposals to exploit Sakhalins vast reserves. Normally, Russia restricts big energy contracts to Russian companies, often in return for corrupt kickbacks. But the sheer scale of the projects here needed foreign capital and expertise.
Craig
Craig: Its a very worthwhile project, for, for the shareholders, for the Sakhalin region, and for the Russian Federation.
TV screening Australian football game
Expats in bar
CAMPBELL: Its certainly worthwhile for Western oilmen.
Every night the bars and clubs in the capital Yuzhno-Sakhalinsk fill with expatriate workers and entrepreneurs.
Riggers from New Zealand.
Concreters from Canada.
Caterers from Australia.
Australian Man: Fantastic. Good place. Good people. Plenty of work. Its going to boom in the next two to three years. Plenty of good people here. The Russian people are cool.
Man 2: Very busy. Huge projects. Lots of things happening.
Man 3: Theres so much oil here and theres so much development to go on. Theres going to be no stop to it.
CAMPBELL: More than 5,000 expatriates are working here and the energy wealth has just begun to be tapped.
Man 3: Been here five years, love the place. Wouldnt come back if I didnt enjoy it.
CAMPBELL: Whats good about it?
Man 3: How can I put it politely?
Women at bar
CAMPBELL: Theyre earning money most Russians could only dream of, and some locals are happy to be part of it. But not everyones overjoyed by the invasion of the oilmen.
Medivoda
Medivoda: All the money will go to the companies involved and to Moscow. I wont speak for the leaders, but ordinary residents wont get anything at all Well only lose out from this project.
Prigorodnye house and garden
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Women in garden
CAMPBELL: The discontent begins in Anatolys village of Prigorodnye, opposite the LNG plant.
Theyll soon have to abandon their homes, without compensation, for a three-kilometre safety cordon around the plant.
Campbell with women
Their final days here are spent watching paradise destroyed.
Woman: Its destroying the whole environment here. It will become a desert. There are no fish. The roads are destroyed. Houses arent being built. Its like Chechnya here. Houses are ruined, the town is destroyed. its a total nightmare.
Woman 2: They arent repairing the roads.
Elena and friend go to beach
CAMPBELL: Anatolys neighbour, Elena Yarbushkina, has been leading the villages opposition to the project without success.
Even the beach they use, along with thousands of others from Korsakov and Yuzhno-Sakhalinsk, will be closed once the LNG plant is on line.
The nearest beach is two hours drive away.
Woman: The interests of the town arent being considered. Our beach is being taken away and theyre not giving us another one.
People on beach
CAMPBELL: Progress was never going to stop for a beach and village. But the loss is part of a pattern thats convinced locals all theyll get from the worlds biggest energy projects is the mess.
Korsakov
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Zlivko walks through square
CAMPBELL: Gennady Zlivko is the mayor of Korsakov, which is playing reluctant host to both the LNG plant and loading terminal.
Zlivko with Campbell looking at map
He says the excavated earth is being dumped straight in the bay.
Zlivko: We are on the banks of a bay which is very rich and valuable for the production of fish, especially salmon. But even so, all our demands that the earth be taken away found no support from Sakhalin Energy.
CAMPBELL: What angers him more is that the town wont even be getting any gas.
Zlivko: How could they not have looked into, as part of the project, the question of providing gas to the town? Imagine this! The factory is the most modern in the world, the biggest. And next to it is a town with 40,000 inhabitants where kettles operate with coal. They didnt even consider providing gas to the town.
Island residents
CAMPBELL: In fact, very soon the islands 600,000 residents wont even be getting revenue from the projects. Originally, the island was guaranteed 40 per cent of the royalties. Now, Moscow has decided to take it all.
Theres no sign the central government will use any of the billions it gets to improve the communitys housing the projects.
Zlivko
Zlivko: Roofs are leaking, we need to repair buildings, theres no heating. In our we only have running water for three hours in the morning and for three hours in the evening. Its unique, isnt it? Where else is there such a situation in the civilized world?
Craig: Its not for us to comment on how the Russian government decide how to distribute the income.
Craig We obviously do what we can to help locally. My company alone has invested over $300 million in infrastructure upgrades, roads, airports, hospital facilities and so on. So there is a direct benefit from our expenditure.
CAMPBELL: Justified or not, the complaints of the local people had little effect on halting the projects, until an unexpected casualty emerged from the blue -- whales.
Whales
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CAMPBELL: As development got underway, a rare species called the Pacific Grey Whale was found to be using a remote feeding ground in sight of Shells new oil platform.
IFAW boat/members
The result has been an international protest campaign by environmentalists, and a public relations disaster for Shell.
Craig
Craig: I am confident it will not mean the extinction of this particular species. Im hopeful that what were doing will actually help to preserve the species.
IFAW members hale watching
CAMPBELL: But environmentalists are not so sure. IFAW, the International Fund for Animal Welfare, is one of several groups now monitoring the small population of endangered whales. Shell has now re-routed the pipeline 12 miles from the rig, but researchers claim the whales are still at risk from oil spills, collisions with tankers, even the noise of construction.
Igor: There are only about 100 grey whales
Igor.
Super: Igor BeliatskiInternational Fund for Animal Welfare left and only 23 reproductive females, and if you lose only one reproductive female per year, so in three years the population will be on the brink of extinction. So it will be lost.
Igor and Campbell walk on beach
CAMPBELL: Igor Beliatski is co-ordinating IFAWs campaign against the Sakhalin Energy project. Its given an international platform to complaints about Shells environmental practices.Igor: They pretend to meet the highest level of international standards, but if you look back at what they did already on Sakhalin, with the construction of the pipeline route through Sakhalin Island and with that oil spill at Kholmsk they violated some rules already.
File footage.
Oil spill
CAMPBELL: Critics saw this oil spill in September 2004 as a sign of the catastrophes the project could bring. It took the company two days to begin clearing a relatively small spill from the fuel tank of a Sakhalin Energy vessel called Christopher Columbus.
Igor: It showed that if the oil spill is really big, really dangerous,
Igor
if it happens with a tanker like the Exxon Valdez, so it would be a real disaster over the year.
Pipes
CAMPBELL: Environmentalists have brought a litany of complaints about the project, questioning what would happen if there were an oil spill underwater while the sea was frozen or underground along the 800-kilometre pipeline route -- all of it in a region prone to earthquakes. Ian Craig insists its all been taken into account.
Craig: The earthquakes are an issue in this region.
Craig
We build into our design, just as theyre built into the design of any facilities in Japan.
Rivers/Salmon
CAMPBELL: But environmentalists arent happy, claiming the pipelines have already damaged streams and rivers vital for salmon spawning.
Igor: Salmon is one of the main treasures of Sakhalin.
Igor
So all the pipelines are crossing the rivers. And sometimes theyre just destroying them, the construction is just destroying the riverbeds. Theyre changing them. Theyre destroying the rivers. And if the salmon cant go up there so it will be lost.
Craig
Craig: There will always be an impact as I mentioned before. The impact is greatest during the construction phase. The destruction is greatest during the construction phase.
Pipeline running through forest Once complete, once the pipelines are buried etcetera, the impact will be minimal. So I think at the end of the day, the islanders will be quite pleased
Craig
that theyre getting the long-term economic benefits and the short-term disruption will be passed.
Island residents
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CAMPBELL: Theres no doubt thousands of islanders have benefited already from the oil and gas. The once backward capital has become a boomtown of new homes, businesses, restaurants and clubs. But many locals whove missed out on the benefits would happily see the oil companies pack up and leave.
Woman
CAMPBELL: If there was no oil and gas, how would the future be?
Woman: Sakhalin has always existed because of the fish. Maybe we arent developed in the industrial sense. But if we have fish and forest, Sakhalin will survive and will trade and maybe we would not be as dependent on Russia as Russia is on us.
Building works
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CAMPBELL: As the problems of the Middle East worsen, corporations will increasingly rely on finding new frontiers like Sakhalin. It remains to be seen if the boom will save the local people from their misery, of if theyll pay the price for the worlds thirst for gas and oil.
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Credits:
Reporter: Eric CampbellCamera: Geoffrey LyeSound: Nathan EnglishEditor: Bryan Milliss