WASHINGTON - March 2 - An independent report released today by five Russian, Japanese and U.S. environmental organizations exposes deep cracks in the seismic risk analysis conducted by Shell and other oil companies for the Sakhalin II oil and gas project in the Russian Far East.

The report documents that Sakhalin II seismic examinations present incomplete, inaccurate and contradictory information, understates seismic risks, fail to provide documentation of site-specific risks at individual fault crossings, and base their findings on hazards to people, but not to the environment.

Independent analyst Richard Fineberg, principal investigator and author of the report, writes:

"The) tight planning and construction schedule increases cause for concern in this regard. While engineering design work for the onshore pipelines is still in process, current design decisions will be guiding construction in the field in the very near future. Experience on (the Trans-Alaskan Pipeline) indicates that field changes to construction plans are liable to result in confusion, delays and the necessity to go back and do the same job over again. Unexpected conditions encountered in the field can be expected to compound this problem. In short, the chaos of large pipeline construction is akin to the fog of war."

Risks to the Environment: Shell et.al propose to bury or trench on-shore oil and gas pipelines across 800 kilometers of Sakhalin's length. Much of this territory is highly active seismically, as indicated by the fact that the pipelines will cross active faults at 22 locations (in contrast, the Trans-Alaska Pipeline only crosses 3 active earthquake faults). Potential impacts to the environment are severe, since these pipelines also cross hundreds of wild salmon-bearing streams. These wild salmon streams support fisheries vital to the island's communities and indigenous people.

According to Dmitry Lisitsyn, Chairman of the Sakhalin Environment Watch:

"his report strengthens our demand for designing Sakhalin II pipelines above ground, where earthquake-induced leaks can be detected, rather than to bury the problem, as Shell wants to do."

The report casts doubts on assurances of project safety made by Shell to public finance institutions that are considering funding for Sakhalin II. These include the European Bank for Reconstruction and Development (EBRD), the U.S. Export-Import Bank, Japanese Bank for International Cooperation, U.K. Export Credit Guarantee Department, and the Dutch Export Credit Agency, NCM. These institutions are currently conducting environmental due diligence on the project.

According to Lisitsyn:

"BRD and the Export Credit Agencies exist to serve the public interest. This independent seismic report shows that risk and impacts of earthquakes from the Sakhalin II project are greater than Shell publicly admits, and more than these public institutions should bear."

The report, 'Seismic Risk and the Onshore Pipeline Portion of Sakhalin Energy Investment Company - Sakhalin-II Phase 2 Project: Unanswered Questions', is available at http://www.pacificenvironment.org/russia/sakhalin_pipeline

Author Richard Fineberg can be reached in Alaska at +1 Phone / fax (907) 479-7778, or by email at fineberg@alaska.net.

Shell Chairman Phil Watts can be reached at +44 20 7934 5556

###