SAN FRANCISCO - March 23 - Citing allegations of Shell’s untrustworthy communications to shareholders, environmentalists are calling on public finance institutions to question the veracity of information Shell provided to them on its Sakhalin II project in Russia. Controversy continues to swirl around Shell’s communications with shareholders regarding its oil and gas reserves. According to the New York Times, company documents suggest an “external storyline” and “investor relations script” that were designed to misinform shareholders about Shell’s dwindling oil and gas reserves. Last week, Shell reduced its oil and gas reserves for the second time this year as U.S. regulators stepped up their investigations into Shell’s misstatements of reserves.

Similarly, environmentalists seeking to protect the unique environment of Sakhalin Island are questioning Shell’s assurances and documents that suggest that the Sakhalin II project is environmentally benign. They argue that on numerous occasions, Shell has failed to provide complete and accurate information about the potential environmental impacts of the project to public finance institutions such as the U.S. Export Import Bank and the European Bank for Reconstruction and Development. Both banks are considering financing the further development of the Sakhalin project.

“Given the allegations of inaccurate information provided to their own internal investors, one can only wonder what snake oil they’re trying to sell to these external public banks,” said David Gordon, Acting Executive Director of Pacific Environment. The San Francisco-based organization supports grassroots efforts on Sakhalin Island with the goal of ensuring that Shell and ExxonMobil use the best available practices in their offshore oil and gas projects.

Pacific Environment is one of 50 organizations from the U.S. and Russia that have called on Shell to improve their oil and gas drilling practices on Sakhalin, a Russian island located about 50 miles north of Japan. Environmental concerns include:

· Shell’s offshore drilling and undersea pipelines will threaten the habitat of the critically endangered Western Pacific Gray Whale, of which only 100 remain. The habitat also supports a variety of other marine biodiversity and fisheries, which are vital to the local economy and subsistence for native peoples. Shell refuses to acknowledge its impacts to recovery of the gray whale population even though scientists have called on disturbances to the whale population to be reduced to a minimum.

· Shell misrepresents the adequacy of its oil spill response plan. For instance, in a recent industrial accident associated with Shell’s construction of a Liquid Natural Gas terminal, it was discovered that the two tugboats that might be called into service in an oil spill do not work at night.

· Shell plans to lay 800 kilometers of pipelines across over 1,000 streams and rivers on Sakhalin Island, including hundreds that provide spawning grounds for wild salmon. Environmental experts contracted by the Sakhalin II operators recommend 24 aerial crossings of these waterways, yet Shell/SEIC proposes to implement none. Most of Shell’s internal expert recommendations on this issue were lost through translation errors, including through omissions and contradictory translations. Meanwhile, Shell’s Environmental Impact Assessment fails to identify at least 27 salmon spawning waterways among the 183 crossings surveyed.

· The project occurs in one of the most seismically active areas of the world, where earthquakes of 8.0 are not uncommon. An independent report released March 2, 2004, exposes significant faults in Shell’s seismic risk analysis. The report documents that Sakhalin II seismic examinations present incomplete, inaccurate and contradictory information, understate 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.

In all of these factors, Shell representatives have reassured finance agencies, as well as local and international concerned citizens and environmentalists, that they are using the best environmental practices. While environmentalists have always been skeptical of these claims, the recent allegations of misleading shareholders by overstating oil reserves just cast more doubt on Shell’s forthrightness.

Doug Norlen, Policy Director at Pacific Environment, said “Shell is accused of deceiving shareholders and presenting inaccurate information to the public institutions considering Sakhalin II. We see a trend here. How long will the banks continue buying Shell’s misrepresentations?”

Pacific Environment protects the living environment of the Pacific Rim by strengthening democracy, supporting grassroots activism, empowering communities, and redefining international policies. Pacific Environment provides direct support to activists working on Sakhalin Island.

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