Sakhalin: Extraction or Extinction
Timecoded Transcript
00:01:30:00 Voice-Over When Anton Chekov visited the island of Sakhalin in the
1890s, he described it as “the end of the world”. Things here haven’t changed much since.
00:02:00:00 This is one of Russia’s most remote outposts, seven time zones and 7,000 km from Moscow.
It’s also one of the poorest places in Russia, with little infrastructure and even less native industry apart from a vital
00:02:30:00 salmon fishery.
Ecologically, it’s rich. It’s waters and wetlands are home to some of the rarest animals on earth. Vast colonies of seabirds, shorebirds and more than twenty marine mammal
00:03:00:00 species contribute to one of the world’s most unique marine
ecosystems.
However, this unique area also contains vast, undeveloped natural energy resources and it’s this impending clash of energy versus environment that has thrown Sakhalin into the international spotlight.
00:03:30:00 Indeed there are so few of these critically endangered Western Grey Whales left that if conservationists worst fears are confirmed, this rare sighting might soon become a thing of the past.
Title Sakhalin: Extraction or Extinction
Voice-Over Sakhalin Energy is the latest pioneering company working in this remote region.
00:04:00:00 A joint venture led by British oil giant, Royal Dutch Shell, and including Japanese groups Mitsubishi and Mitsui, the consortium plans to develop Sakhalin-II, a huge project which represents the single largest oil and gas development in Russia.
David Greer: Deputy CEO, Sakhalin Energy
Russia contains about 27% of the world’s gas reserves, and with gas being the cleanest hydrocarbon we know, Russia
00:04:30:00 and places like Sakhalin will continue to play a very important role in the overall energy matrix.
With continued economic growth, the world’s energy needs are going to grow by some 50% over the next 25 years. It is absolutely inevitable that the industry is going to have to move into these tougher frontier areas.
00:05:00:00 Voice-Over Sakhalin-II perfectly symbolises the investment and
infrastructure crucial to operating in such frontier areas. The project will exploit as yet undeveloped oil and gas fields off the north east of the island, holding a massive billion barrels of crude and half a trillion cubic metres of gas. However, as these fields are frequently ice-bound, new platforms off-shore will supply a massive pipeline linking the northern fields with the ice-free south.
00:05:30:00 After this 800km pipeline journey, Sakhalin’s oil and gas reaches a new, purpose-built, year-round oil and gas terminal, of which a key part is Russia’s first Liquefied Natural Gas plant. It’s cutting-edge technology like this that is central to Russia’s open ambition to become a dominant player in global energy supply.
00:06:00:00 However, Russia needs foreign expertise and investment to help develop its oil and gas frontiers. And with energy driving the country’s economic recovery, plus fears that they’ll lose control of what’s fast becoming their main foreign policy tool, the Kremlin is growing wary of too much Western involvement.
00:06:30:00 Western oil majors like Shell are rich enough to go it alone in Russia, but in this uncertain business environment, they like a little political and financial security. One of the ways to achieve this is to attract the financial backing of international public sector banks, like the European Bank for Reconstruction and Development.
00:07:00:00 Alistair Clarke: Director of Environment Department, European Bank for
Reconstruction and Development
The primary role of our institution is to foster the market
economy in our countries of operation, including the Russian Federation. Now this project, for the first time, will link the economy of the far east, of the Russian Federation, with the global economy. The gas will be used by Korea, by Japan, and even, potentially, by the US, so it’s a key global economic linkage which fits entirely with our mandate.
00:07:30:00 With Russia as a shareholder, we offer some form of comfort to Shell to say that the rules of the game won’t change with our involvement and that’s why they’re interested in our financing. What we bring to the project, if we are involved, will be transparency.
Voice-Over However, it’s this very transparency and international scrutiny that has made Sakhalin-II look even less attractive at this sensitive time in Russian oil politics.
00:08:00:00 Julian Lee: Senior Energy Analyst, Centre for Global Energy Studies
It’s certainly not popular in Russia. Sakhalin-II project is one
of three projects under production-sharing terms and they have really fallen out of favour in Russia and these projects are under a great deal of scrutiny.
Voice-Over The project is experiencing considerable cost overruns, compounded by delays stemming from environmental
00:08:30:00 concerns. The European Bank for Reconstruction and Development has strict rules for operating in these pristine environments, and has postponed lending money until Sakhalin Energy can show that they are minimising their environmental impact.
Alistair Clarke We establish a whole range of commitments that the
company has to undertake, not only during construction, but actually during operation as well
00:09:00:00 We’re not waiting for evidence that they’re not in compliance, we’re waiting for evidence that they are in compliance and that’s a key issue for us, so we’ve set them performance benchmarks and the company is trying to achieve them and we will wait until they have. They have to agree to the commitments, which they have done, they now have to implement them.
00:09:30:00 Voice-Over Sakahlin’s natural reserves and it’s bio-diverse environment
seem inextricably linked. The discovery of oil in this region in the 1980s coincided with the rediscovery of the Western Gray Whale, thought to have been hunted to extinction in the 1950s. The species has barely recovered, and there are thought to be only around a hundred of these animals left. The coastal waters of Sakhalin are crucial to the whales’ survival as these unique shallows are the only place in the world where they come to feed.
00:10:00:00 However the sad irony is this is exactly where the oil is, and
getting the oil out might be the greatest threat to the whales future survival.
The feeding area is just a few kilometres from Sakhalin-II’s new pipeline and oil and gas rigs, with the peak in construction activities and whale numbers clashing in the ice-free summer
00:10:30:00 Sakhalin Energy have already made a costly concession to
the whales by re-routing their pipeline around the feeding area. But it is the ongoing noise from construction and operation that continues to worry conservationists.
00:11:00:00 Grisha Tsidulko: Marine Mammal Campaigner, International Fund for Animal
Welfare (Russia)
Sakhalin Energy, the company that operates this project,
Sakhalin-II, made some strong commitments and they promised that the construction noise levels won’t exceed 120 decibels in the whale feeding ground. That’s the critical level when whales start to leave: 120 decibels.
00:11:30:00 Robbie Marsland: Director, International Fund for Animal Welfare (UK)
We’ve got monitors on the lighthouse, visual monitoring
one hour in four and our research vessel is on its way and tomorrow we’ll start audio monitoring to make sure that the decibel levels don’t go above the amount that, Shell agree, are going to be too high for the Western Gray Whales.
00:12:00:00 Voice-Over The top of this Soviet era lighthouse is home to some ‘Cold
War style’ spying. The team from the International Fund for Animal Welfare monitor the whales’ behaviour, and just below them, Sakhalin Energy’s own scientific team record the noise of construction through underwater microphones. As yet there is no direct evidence that construction is disturbing the whales’ feeding behaviour.
00:12:30:00 However, with the long-term effects of Sakhalin’s activities
unknown and for an animal that’s teetering on the brink of extinction, most environmentalists consider any disturbance as less than acceptable. In February 2005 the World Conservation Union reported that “the most precautionary approach would be to suspend present operations and delay further development of the oil and gas reserves in the vicinity of the Gray Whale feeding grounds.
00:13:00:00 The International Scientific Review panel also pointed out
that the loss of just one additional adult female per year would be sufficient to drive the population towards extinction. With the pipeline rerouted and the whales being so actively monitored, the question now is whether such a critically endangered species can co-exist with oil and gas developments on this scale.
00:13:30:00 Robbie MarslandWhat we’ve achieved is that we’re in total agreement with
Shell, the pipeline that was planned to go through, believe it or not, the feeding ground of the Western Gray Whale has been moved. I really do hope that the Western Gray Whale is protected by the measure that they introduce. My own confidence? I’m going to wait and see.
00:14:00:00 Voice-Over However, it’s not just the whales that are causing concern.
Robbie MarslandThat pipeline goes over 1,100 different river, 192 of those
rivers are salmon-spawning rivers.
00:14:30:00 The pipeline goes over 42 different seismic fault-lines, it also
goes over the remnants of coal-mines that were dug in the Soviet times. Now, there are very many causes for concern there and again this is an area which needs to be watched very, very carefully.
Dmitry Lisitsyn: Chairman, Sakhalin Environment Watch
Sakhalin people know how the oil industry is dangerous
00:15:00:00 because the seventy years of cultural development shows us
the long-term and substantial contamination of our rivers by oil. The big spills from the on-shore pipeline, I think it’s not a very big problem because it’s easy to identify it, to find and to stop.
00:15:30:00 But the long-term small leakages of oil, this is a very big
problem, because the international progress shows that oil
companies don’t care about the small leakages and small,
long-term leakage can contaminate the spawning rivers and
it will be very difficult to identify because it is a buried
pipeline.
Sakhalin island has a huge amount of salmon-spawning rivers. Salmon is the main resource of our fishing economy, and fishing economy is the most important for our local people, much more important than the oil industry.
00:16: 00:00 At least one-third of the whole island’s population directly and
strongly depends on the fishing industry.
Voice-Over Offshore, the concerns over potential oil spills are equally high.
00:16:30:00 Robbie Marsland The International Fund for Animal Welfare is very, very
experienced in dealing with oil spills, especially in relation to oiled sea-birds, and one of the things that we know is that nobody, anywhere in the world has a plan of how to deal with oil on ice. We’ve dealt with many slicks at sea, but no-one knows how you deal with an oil-spill on top of the ice or, worse still, under the ice.
00:17:00:00 Voice-Over Due to the grave concerns expressed by the scientific
community, the Sakhalin-II project continues to await the outcome of potential public sector investment, by groups such as the European Bank for Reconstruction and Development.
Robbie Marsland What we want them to do is to invest in this project if it’s fit
for purpose, and being fit for purpose would mean that it didn’t have a detrimental environmental impact, either on the spawning-grounds of the salmon or on the Western Gray Whale.
00:17:30:00 If it’s shown, and as independent scientific research seems
to be showing at the moment, that it would have a detrimental impact on the whales and on the salmon then, yes, we would be saying that they shouldn’t be investing and that big questions should be asked over the whole enterprise.
Voice-Over The decision of the European Bank for Reconstruction and
Development on whether this project is fit for purpose will send a strong signal to the international partners of the Sakhalin-II project.
00:18:00:00 Alistair Clarke We’re setting a benchmark for the whole of the oil industry to
follow as they go into frontier territories. Those will get more and more sensitive as the known deposits are being exploited, the oil industry is going to go out into more frontier areas to find and exploit those resources
00:18:30:00 Voice-Over However, it’s already 75% complete and the project could be
finished next year without further investment. And deliver oil and gas for decades. But the delays and overspends may make this frontier development one-of-a-kind. The way Russia makes deals with foreign oil companies is
00:19:00:00 undoubtedly changing and that will have ramifications for the world’s energy security and the global environment.
Julian Lee This project isn’t going to stop, it’s far too important to Russia, it’s far too important to Shell and even if Shell for some completely unforeseeable reason were forced to pull out of the project what we would see is the rapid replacement
00:19:30:00 with Russian oil companies. It’s the only major project in
Russia that has no Russian company involvement. That will
change. We will see Gazprom come into this project at some time.
David Greer If we were not developing this province out here, somebody else would. I believe society has to make a decision, a choice, to support those companies who do live up to these high standards, such as we have, in the development of these reserves.
00:20:00:00 That’s a choice for society to make, that’s a choice for
governments to make. We believe that we are setting new, exacting standards in that regard, and expect to continue to play a role in the development of such frontier areas.
Julian Lee I think every oil company these days is very aware of its environmental image, very aware of it’s environmental
00:20:30:00 footprint in its upstream operations. So Shell will be very concerned to meet the terms of its environmental impact assessment and to be seen as a good environmental citizen.
David Greer That is the way that society should have a right to expect oil companies to operate, for after all the environmental prerogative is absolutely key.
Voice-Over Sceptics argue that you’d expect to hear that from a consortium led by a company that trades on its green image.
00:21:00:00 But Shell’s shareholders have made them accountable in the past, not a legacy shared by every oil company.
The scales certainly seem to be tipping in favour of Russia’s indigenous oil giants. Rosneft, already the main player in Sakhalin’s onshore oil will lead the development of two new offshore projects, with Western oil majors now playing a minor role.
00:21:30:00 Domestic oil and gas companies like Rosneft argue their
environmental standards are as high as any. But what is certain is that their sensitivity in technically challenging new frontiers will only be tested once the drilling has started.
00:22:00:00 Julian Lee Shell is being accused, or the project is being accused, of not
meeting its own environmental targets. The fact that Shell is there as the operator of this project means that it is much, much more open to international scrutiny, scrutiny by NGOs than would be the case if Shell weren’t there. So in some sense, I think, if for some unforeseen reason we were to see Shell leave this project, which again I don’t think is likely, but if it were to happen, then I think the whole thing would become much more opaque, we would hear much less about what’s going on and there would be much less scrutiny over the environmental impact.
00:22:30:00 David Greer Sakhalin Energy’s role is absolutely huge. 27% of the gas
reserves are lying here in Russia and to develop those gas reserves is going to require inward investment in the region of $900 billion over the next 25 years. Now, I’d like to think that there’s a huge role for companies like our own, our own
00:23:00:00 shareholders, to take part in that development to meet society’s ever-increasing need for energy. The fact that we can deploy the technologies that we’re deploying, the fact that we can do what we’re doing in this harsh environment with these new technologies will show to our competitors and to those who follow us that it is possible. Russia means business.
00:23:30:00 Voice-Over The latest twist to Sakhalin-II’s development happened in
August 2006, when the Russian environmental watchdog announced plans to attempt to block the project due to reported non-compliance with ecological legislation. As a result, and until an agreement can be reached, the construction of the onshore pipelines has been suspended.
00:24:00:00 Some industry watchers are claiming that this dispute is the
latest attempt by the Kremlin to tighten its grip on lucrative Russian energy resources. Paradoxically, it seems that the environmental sensitivity which first grabbed international attention for this project, and arguably led to higher accountability and transparency by the companies involved, is the very thing that might be used as leverage to take back ownership of national resources.
00:24:30:00 It seems that Russia does, indeed, mean business. And the
extraction of its largely undeveloped natural resources will see it becoming an increasingly dominant player in global energy supply. The question remains whether international consortiums like Sakhalin Energy will be able to operate in these new frontier developments. Or whether Russia will limit foreign investment in the future.
00:25:00:00 Either way, the environmental costs so clearly highlighted by
the Sakhalin-II project seem unavoidable.
Grisha Tsidulko We never intended to stop the project. We understand the
importance of energy and energy supplies provided to the outside world, but we also know that we have to ensure that at the same time, nature is not destroyed. Because the
00:25:30:00 discovered oil and gas reserves here, of Piltun Lagoon, will
last only for 40 years, and when the oil is over, what will we have at the end? Our sincere hope is that whales will be here many hundreds of years before, and they will come here for many more years after.
Voice-Over These environmental concerns will only be answered in retrospect.
00:26:00:00 What is clear now is that the ever-increasing global demand
for energy is driving oil and gas developments to the very furthest frontiers in search of new reserves and it seems politics, not public opinion, will decide which companies are charged with the responsibilities of operating there.
It will be in pristine environments like Sakhalin that the price of our energy demands and our energy security fears will be exacted.
00:26:30:00 And in the case of the Western Gray Whale, that cost could be extinction.
Title Narrated by:
Piers Gibbon
Assistant Producer:
Carina Wilson
Camera:
Stuart Webb
Location Direction:
Tom Clarke
Original Music:
Joe Zeitlin and Chris Trueman
Performed by:
Joe Zeitlin
Graphics:
David Storr
Editor:
Mandi McInnes
Produced and Directed by:
Sarah Tierney
00:27:00:00 Clarity Productions
Timecoded Transcript
00:01:30:00 Voice-Over When Anton Chekov visited the island of Sakhalin in the
1890s, he described it as “the end of the world”. Things here haven’t changed much since.
00:02:00:00 This is one of Russia’s most remote outposts, seven time zones and 7,000 km from Moscow.
It’s also one of the poorest places in Russia, with little infrastructure and even less native industry apart from a vital
00:02:30:00 salmon fishery.
Ecologically, it’s rich. It’s waters and wetlands are home to some of the rarest animals on earth. Vast colonies of seabirds, shorebirds and more than twenty marine mammal
00:03:00:00 species contribute to one of the world’s most unique marine
ecosystems.
However, this unique area also contains vast, undeveloped natural energy resources and it’s this impending clash of energy versus environment that has thrown Sakhalin into the international spotlight.
00:03:30:00 Indeed there are so few of these critically endangered Western Grey Whales left that if conservationists worst fears are confirmed, this rare sighting might soon become a thing of the past.
Title Sakhalin: Extraction or Extinction
Voice-Over Sakhalin Energy is the latest pioneering company working in this remote region.
00:04:00:00 A joint venture led by British oil giant, Royal Dutch Shell, and including Japanese groups Mitsubishi and Mitsui, the consortium plans to develop Sakhalin-II, a huge project which represents the single largest oil and gas development in Russia.
David Greer: Deputy CEO, Sakhalin Energy
Russia contains about 27% of the world’s gas reserves, and with gas being the cleanest hydrocarbon we know, Russia
00:04:30:00 and places like Sakhalin will continue to play a very important role in the overall energy matrix.
With continued economic growth, the world’s energy needs are going to grow by some 50% over the next 25 years. It is absolutely inevitable that the industry is going to have to move into these tougher frontier areas.
00:05:00:00 Voice-Over Sakhalin-II perfectly symbolises the investment and
infrastructure crucial to operating in such frontier areas. The project will exploit as yet undeveloped oil and gas fields off the north east of the island, holding a massive billion barrels of crude and half a trillion cubic metres of gas. However, as these fields are frequently ice-bound, new platforms off-shore will supply a massive pipeline linking the northern fields with the ice-free south.
00:05:30:00 After this 800km pipeline journey, Sakhalin’s oil and gas reaches a new, purpose-built, year-round oil and gas terminal, of which a key part is Russia’s first Liquefied Natural Gas plant. It’s cutting-edge technology like this that is central to Russia’s open ambition to become a dominant player in global energy supply.
00:06:00:00 However, Russia needs foreign expertise and investment to help develop its oil and gas frontiers. And with energy driving the country’s economic recovery, plus fears that they’ll lose control of what’s fast becoming their main foreign policy tool, the Kremlin is growing wary of too much Western involvement.
00:06:30:00 Western oil majors like Shell are rich enough to go it alone in Russia, but in this uncertain business environment, they like a little political and financial security. One of the ways to achieve this is to attract the financial backing of international public sector banks, like the European Bank for Reconstruction and Development.
00:07:00:00 Alistair Clarke: Director of Environment Department, European Bank for
Reconstruction and Development
The primary role of our institution is to foster the market
economy in our countries of operation, including the Russian Federation. Now this project, for the first time, will link the economy of the far east, of the Russian Federation, with the global economy. The gas will be used by Korea, by Japan, and even, potentially, by the US, so it’s a key global economic linkage which fits entirely with our mandate.
00:07:30:00 With Russia as a shareholder, we offer some form of comfort to Shell to say that the rules of the game won’t change with our involvement and that’s why they’re interested in our financing. What we bring to the project, if we are involved, will be transparency.
Voice-Over However, it’s this very transparency and international scrutiny that has made Sakhalin-II look even less attractive at this sensitive time in Russian oil politics.
00:08:00:00 Julian Lee: Senior Energy Analyst, Centre for Global Energy Studies
It’s certainly not popular in Russia. Sakhalin-II project is one
of three projects under production-sharing terms and they have really fallen out of favour in Russia and these projects are under a great deal of scrutiny.
Voice-Over The project is experiencing considerable cost overruns, compounded by delays stemming from environmental
00:08:30:00 concerns. The European Bank for Reconstruction and Development has strict rules for operating in these pristine environments, and has postponed lending money until Sakhalin Energy can show that they are minimising their environmental impact.
Alistair Clarke We establish a whole range of commitments that the
company has to undertake, not only during construction, but actually during operation as well
00:09:00:00 We’re not waiting for evidence that they’re not in compliance, we’re waiting for evidence that they are in compliance and that’s a key issue for us, so we’ve set them performance benchmarks and the company is trying to achieve them and we will wait until they have. They have to agree to the commitments, which they have done, they now have to implement them.
00:09:30:00 Voice-Over Sakahlin’s natural reserves and it’s bio-diverse environment
seem inextricably linked. The discovery of oil in this region in the 1980s coincided with the rediscovery of the Western Gray Whale, thought to have been hunted to extinction in the 1950s. The species has barely recovered, and there are thought to be only around a hundred of these animals left. The coastal waters of Sakhalin are crucial to the whales’ survival as these unique shallows are the only place in the world where they come to feed.
00:10:00:00 However the sad irony is this is exactly where the oil is, and
getting the oil out might be the greatest threat to the whales future survival.
The feeding area is just a few kilometres from Sakhalin-II’s new pipeline and oil and gas rigs, with the peak in construction activities and whale numbers clashing in the ice-free summer
00:10:30:00 Sakhalin Energy have already made a costly concession to
the whales by re-routing their pipeline around the feeding area. But it is the ongoing noise from construction and operation that continues to worry conservationists.
00:11:00:00 Grisha Tsidulko: Marine Mammal Campaigner, International Fund for Animal
Welfare (Russia)
Sakhalin Energy, the company that operates this project,
Sakhalin-II, made some strong commitments and they promised that the construction noise levels won’t exceed 120 decibels in the whale feeding ground. That’s the critical level when whales start to leave: 120 decibels.
00:11:30:00 Robbie Marsland: Director, International Fund for Animal Welfare (UK)
We’ve got monitors on the lighthouse, visual monitoring
one hour in four and our research vessel is on its way and tomorrow we’ll start audio monitoring to make sure that the decibel levels don’t go above the amount that, Shell agree, are going to be too high for the Western Gray Whales.
00:12:00:00 Voice-Over The top of this Soviet era lighthouse is home to some ‘Cold
War style’ spying. The team from the International Fund for Animal Welfare monitor the whales’ behaviour, and just below them, Sakhalin Energy’s own scientific team record the noise of construction through underwater microphones. As yet there is no direct evidence that construction is disturbing the whales’ feeding behaviour.
00:12:30:00 However, with the long-term effects of Sakhalin’s activities
unknown and for an animal that’s teetering on the brink of extinction, most environmentalists consider any disturbance as less than acceptable. In February 2005 the World Conservation Union reported that “the most precautionary approach would be to suspend present operations and delay further development of the oil and gas reserves in the vicinity of the Gray Whale feeding grounds.
00:13:00:00 The International Scientific Review panel also pointed out
that the loss of just one additional adult female per year would be sufficient to drive the population towards extinction. With the pipeline rerouted and the whales being so actively monitored, the question now is whether such a critically endangered species can co-exist with oil and gas developments on this scale.
00:13:30:00 Robbie MarslandWhat we’ve achieved is that we’re in total agreement with
Shell, the pipeline that was planned to go through, believe it or not, the feeding ground of the Western Gray Whale has been moved. I really do hope that the Western Gray Whale is protected by the measure that they introduce. My own confidence? I’m going to wait and see.
00:14:00:00 Voice-Over However, it’s not just the whales that are causing concern.
Robbie MarslandThat pipeline goes over 1,100 different river, 192 of those
rivers are salmon-spawning rivers.
00:14:30:00 The pipeline goes over 42 different seismic fault-lines, it also
goes over the remnants of coal-mines that were dug in the Soviet times. Now, there are very many causes for concern there and again this is an area which needs to be watched very, very carefully.
Dmitry Lisitsyn: Chairman, Sakhalin Environment Watch
Sakhalin people know how the oil industry is dangerous
00:15:00:00 because the seventy years of cultural development shows us
the long-term and substantial contamination of our rivers by oil. The big spills from the on-shore pipeline, I think it’s not a very big problem because it’s easy to identify it, to find and to stop.
00:15:30:00 But the long-term small leakages of oil, this is a very big
problem, because the international progress shows that oil
companies don’t care about the small leakages and small,
long-term leakage can contaminate the spawning rivers and
it will be very difficult to identify because it is a buried
pipeline.
Sakhalin island has a huge amount of salmon-spawning rivers. Salmon is the main resource of our fishing economy, and fishing economy is the most important for our local people, much more important than the oil industry.
00:16: 00:00 At least one-third of the whole island’s population directly and
strongly depends on the fishing industry.
Voice-Over Offshore, the concerns over potential oil spills are equally high.
00:16:30:00 Robbie Marsland The International Fund for Animal Welfare is very, very
experienced in dealing with oil spills, especially in relation to oiled sea-birds, and one of the things that we know is that nobody, anywhere in the world has a plan of how to deal with oil on ice. We’ve dealt with many slicks at sea, but no-one knows how you deal with an oil-spill on top of the ice or, worse still, under the ice.
00:17:00:00 Voice-Over Due to the grave concerns expressed by the scientific
community, the Sakhalin-II project continues to await the outcome of potential public sector investment, by groups such as the European Bank for Reconstruction and Development.
Robbie Marsland What we want them to do is to invest in this project if it’s fit
for purpose, and being fit for purpose would mean that it didn’t have a detrimental environmental impact, either on the spawning-grounds of the salmon or on the Western Gray Whale.
00:17:30:00 If it’s shown, and as independent scientific research seems
to be showing at the moment, that it would have a detrimental impact on the whales and on the salmon then, yes, we would be saying that they shouldn’t be investing and that big questions should be asked over the whole enterprise.
Voice-Over The decision of the European Bank for Reconstruction and
Development on whether this project is fit for purpose will send a strong signal to the international partners of the Sakhalin-II project.
00:18:00:00 Alistair Clarke We’re setting a benchmark for the whole of the oil industry to
follow as they go into frontier territories. Those will get more and more sensitive as the known deposits are being exploited, the oil industry is going to go out into more frontier areas to find and exploit those resources
00:18:30:00 Voice-Over However, it’s already 75% complete and the project could be
finished next year without further investment. And deliver oil and gas for decades. But the delays and overspends may make this frontier development one-of-a-kind. The way Russia makes deals with foreign oil companies is
00:19:00:00 undoubtedly changing and that will have ramifications for the world’s energy security and the global environment.
Julian Lee This project isn’t going to stop, it’s far too important to Russia, it’s far too important to Shell and even if Shell for some completely unforeseeable reason were forced to pull out of the project what we would see is the rapid replacement
00:19:30:00 with Russian oil companies. It’s the only major project in
Russia that has no Russian company involvement. That will
change. We will see Gazprom come into this project at some time.
David Greer If we were not developing this province out here, somebody else would. I believe society has to make a decision, a choice, to support those companies who do live up to these high standards, such as we have, in the development of these reserves.
00:20:00:00 That’s a choice for society to make, that’s a choice for
governments to make. We believe that we are setting new, exacting standards in that regard, and expect to continue to play a role in the development of such frontier areas.
Julian Lee I think every oil company these days is very aware of its environmental image, very aware of it’s environmental
00:20:30:00 footprint in its upstream operations. So Shell will be very concerned to meet the terms of its environmental impact assessment and to be seen as a good environmental citizen.
David Greer That is the way that society should have a right to expect oil companies to operate, for after all the environmental prerogative is absolutely key.
Voice-Over Sceptics argue that you’d expect to hear that from a consortium led by a company that trades on its green image.
00:21:00:00 But Shell’s shareholders have made them accountable in the past, not a legacy shared by every oil company.
The scales certainly seem to be tipping in favour of Russia’s indigenous oil giants. Rosneft, already the main player in Sakhalin’s onshore oil will lead the development of two new offshore projects, with Western oil majors now playing a minor role.
00:21:30:00 Domestic oil and gas companies like Rosneft argue their
environmental standards are as high as any. But what is certain is that their sensitivity in technically challenging new frontiers will only be tested once the drilling has started.
00:22:00:00 Julian Lee Shell is being accused, or the project is being accused, of not
meeting its own environmental targets. The fact that Shell is there as the operator of this project means that it is much, much more open to international scrutiny, scrutiny by NGOs than would be the case if Shell weren’t there. So in some sense, I think, if for some unforeseen reason we were to see Shell leave this project, which again I don’t think is likely, but if it were to happen, then I think the whole thing would become much more opaque, we would hear much less about what’s going on and there would be much less scrutiny over the environmental impact.
00:22:30:00 David Greer Sakhalin Energy’s role is absolutely huge. 27% of the gas
reserves are lying here in Russia and to develop those gas reserves is going to require inward investment in the region of $900 billion over the next 25 years. Now, I’d like to think that there’s a huge role for companies like our own, our own
00:23:00:00 shareholders, to take part in that development to meet society’s ever-increasing need for energy. The fact that we can deploy the technologies that we’re deploying, the fact that we can do what we’re doing in this harsh environment with these new technologies will show to our competitors and to those who follow us that it is possible. Russia means business.
00:23:30:00 Voice-Over The latest twist to Sakhalin-II’s development happened in
August 2006, when the Russian environmental watchdog announced plans to attempt to block the project due to reported non-compliance with ecological legislation. As a result, and until an agreement can be reached, the construction of the onshore pipelines has been suspended.
00:24:00:00 Some industry watchers are claiming that this dispute is the
latest attempt by the Kremlin to tighten its grip on lucrative Russian energy resources. Paradoxically, it seems that the environmental sensitivity which first grabbed international attention for this project, and arguably led to higher accountability and transparency by the companies involved, is the very thing that might be used as leverage to take back ownership of national resources.
00:24:30:00 It seems that Russia does, indeed, mean business. And the
extraction of its largely undeveloped natural resources will see it becoming an increasingly dominant player in global energy supply. The question remains whether international consortiums like Sakhalin Energy will be able to operate in these new frontier developments. Or whether Russia will limit foreign investment in the future.
00:25:00:00 Either way, the environmental costs so clearly highlighted by
the Sakhalin-II project seem unavoidable.
Grisha Tsidulko We never intended to stop the project. We understand the
importance of energy and energy supplies provided to the outside world, but we also know that we have to ensure that at the same time, nature is not destroyed. Because the
00:25:30:00 discovered oil and gas reserves here, of Piltun Lagoon, will
last only for 40 years, and when the oil is over, what will we have at the end? Our sincere hope is that whales will be here many hundreds of years before, and they will come here for many more years after.
Voice-Over These environmental concerns will only be answered in retrospect.
00:26:00:00 What is clear now is that the ever-increasing global demand
for energy is driving oil and gas developments to the very furthest frontiers in search of new reserves and it seems politics, not public opinion, will decide which companies are charged with the responsibilities of operating there.
It will be in pristine environments like Sakhalin that the price of our energy demands and our energy security fears will be exacted.
00:26:30:00 And in the case of the Western Gray Whale, that cost could be extinction.
Title Narrated by:
Piers Gibbon
Assistant Producer:
Carina Wilson
Camera:
Stuart Webb
Location Direction:
Tom Clarke
Original Music:
Joe Zeitlin and Chris Trueman
Performed by:
Joe Zeitlin
Graphics:
David Storr
Editor:
Mandi McInnes
Produced and Directed by:
Sarah Tierney
00:27:00:00 Clarity Productions