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Rough Cut: Russia: Island on the Edge
Background Story Links
For more coverage of the petro-politics surrounding Sakhalin Island's vast oil and gas reserves, and for some history of the island, follow these links.

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Blue Oil Cans

Shell oil platform off the northeast coast of Sakhalin.

Shell Shakedown
This February 2007 feature in Fortune magazine discusses how Shell ultimately lost control of the $22 billion Sakhalin project. In the summer of 2006, the Russian Ministry of Natural Resources got behind the island's environmental movement and put a stop to work on the massive Shell pipeline project connecting oil and gas fields in the north to a liquefied natural gas terminal and oil-export facility in the south. Shell was threatened with a $50 billion environmental lawsuit and risked losing everything. "That Shell and its partners were victims of an unscrupulous campaign by the Russians to win leverage at the negotiating table is certainly true," writes Fortune reporter Abrahm Lustgarten.

Shell to pay annual div to Russian govt in Sakhalin deal - report
Forbes is one of the leading sources of information on the business of energy development on Sakhalin Island. This story, posted April 2007, discusses a recent agreement between Shell and the Russian government, which requires Shell to pay a yearly dividend for overrun costs and environmental damage caused by its Sakhalin project. The report reveals that sources close to the deal suggest the sum will be under $1 billion a year and payments will begin in 2010.

Sakhalin Map

Sakhalin Island Map showing offshore oil platforms and both Shell and Exxon's Piplines.

Rough Patch: Exxon Strives to Stay on Russia's Good Side Subscription Required
The Wall Street Journal has also reported on recent developments on Sakhalin, including a May 7 article looking at what is in store for the island's other large oil and gas project, run by ExxonMobil. Reporters Gregory L. White and Jeffery Ball report that "the world's largest publicly traded oil company has clashed repeatedly with Russian authorities over ... details crucial, in Exxon's mind, to maximizing the project's profitability." Like Shell, Exxon has become ensnared in regulatory crackdowns by President Putin's government. The normally brash and confident Exxon, the report says, is now trying to lie low and "concentrate on the operational details it still can control" on its Sakhalin project.

European Bank for Reconstruction and Development (EBRD) -- Sakhalin
The EBRD, which has become the largest investor in Central and Eastern Europe since the collapse of Communism, considered financing the Shell Sakhalin 2 project. When the bank later pulled out, environmentalists praised the action. But industry analysts said the bank's decision was more likely a vote in support of free markets and against Russia's decision to renationalize the Shell project under the state energy company, Gazprom. The EBRD Web site offers reports on environmental impact studies and public debate about the island's oil and gas development. Executive summaries of these assessments can be downloaded in PDF.

Blue Oil Cans

Children play near rusted out boats in the southern port town of Korsakov.

Sakhalin Energy -- The New Energy Source for the Asia-Pacific
The Web site of Sakhalin Energy, the consortium that owns and operates the Sakhalin 2 oil and gas project, regularly posts reports about its environmental and community work. The site also details the latest construction phases of the offshore platforms and pipelines that are in development.

Sakhalin Environment Watch -- Sakhalin Oil and Gas Project
Sakhalin Environment Watch organizes citizen monitoring of energy development on the island. According to environmentalists, oil and gas construction projects will damage the island's ecosystem, "destroying the marine environment; and threatening the livelihood of tens of thousands of fishermen." The group also reports a rise in prostitution since the arrival of large numbers of "foreign male workers to the island." There are also links to news articles and press releases about environmental violations, which local protestors say have been caused by Shell and its subcontractors.

Woman and child.

Mother and son in a Nivhki fishing village on Sakhalin's Piltun Bay.

Pacific Environment -- Russia Program
The California-based nonprofit Pacific Environment works with Sakhalin activists to highlight the environmental impact of energy resource development on the island. The group has called for Shell, ExxonMobil and other energy companies to "apply the best international social and environmental standards to their Sakhalin projects or halt them altogether." The group has also pressured public and private banks to withhold funding of the project until certain environmental criteria are met.

Russian Association of Indigenous People of the North (RAIPON)
RAIPON, developed during the era of perestroika (or "reconstructing") ushered in by Mikhail Gorbachev in the late 1980s, brought Russia's indigenous population of 200,000 individuals from more than 30 ethnic groups together under one umbrella. Their site provides historical context for these groups, including those who settled on the island of Sakhalin. The ethnic groups roamed and later settled and lived in the vast and bleak northern territories of Russia for hundreds of years, practicing their traditions of fishing and reindeer herding, and preserving their deep cultural connection to the land.

The Sakhalin Regional Museum
The Sakhalin Regional Museum maintains a Web presence that provides a closer look at Sakhalin and the three main ethnic groups that inhabit the island. The site pays homage to the island's colorful history from the time when Russian explorers first arrived in the 17th century to the late 19th century, when a decree by the tsar turned the island into Russia's largest penal colony.