Yuzno.com

payday loans

Gazprom’s Sakhalin-2 buy may let EBRD off the hook

Russian gas giant Gazprom's decision to take a majority stake in the Royal Dutch Shell-led Sakhalin-2 project may save the European Bank for Reconstruction and Development (EBRD) from having to approve its most controversial loan application ever.

Analysts and industry executives said the fact Gazprom is government-controlled means the EBRD will likely be precluded by its charter from extending a loan to the project.

The bank was founded to help the countries of the former Soviet bloc move toward market economies but the Sakhalin deal -- which followed months of pressure on the project partners from the Russian government -- amounts to a renationalization of the Sakhalin-2 oil and gas fields, analysts say.

"This new development certainly does make it more difficult for the bank (to participate) and it may certainly make the EBRD less needed in the project," said Brigid Janssen, the EBRD's director of communications.

Shortly before Gazprom, Shell and their Japanese partners Mitsui and Mitsubishi in the $22 billion project announced the deal on December 21, Mitsui and Mitsubishi told analysts that the project may no longer seek financing from the EBRD and other western government-backed lenders.

Previously, the EBRD was under pressure from its owners -- mainly western nations -- to approve the strategic project, sources inside the EBRD and industry sources said, despite sharp criticism from environmentalists.

POOR RECORD

The EBRD is supposed to demand strict environmental compliance from its borrowers and green groups said Shell's poor record in managing Sakhalin-2 meant the project did not qualify.

Janssen said the EBRD had not yet decided on whether the project met its environmental criteria and had yet not decided whether Gazprom's involvement precluded a loan.

Sakhalin-2 is 80 percent complete and industry executives and analysts expect the project to be completed irrespective of whether it secures a $6 billion to 7 billion finance package from the EBRD and others.

Oil and gas production will occur near the feeding grounds of the endangered Western Gray Whale and pipelines transporting the oil and gas must cross more than 1,100 rivers and water courses.

Shell admitted failings but said these had been rectified.

EBRD insiders conceded the bank's reputation as an environmentally conscientious lender was on the line but the bank feels its involvement over recent years had prodded Shell to improve the project's record.

The EBRD's strict environmental rules mean other lenders often base their lending decisions on whether the bank decides a project is environmentally sound.

Gazprom's involvement in the project, at what analysts saw as a knock-down price, is a big blow for Shell. Following the deal, analysts at Citigroup cut their earnings forecasts for the Anglo-Dutch oil major by 4 percent after 2009, when the project comes fully onstream.

© Reuters


≡ Leave a Reply

Copyright © 2019 Yuzno.com | Yuzno.com is supported by WP + USB. Designed by milo.
| News RSS | Comments RSS.