Pipeline protests hit Shell

SHELL has suspended work in Russia on parts of a controversial £6bn gas and oil pipeline - the most expensive in the world.

As the group last week cemented the merger of its Dutch and British arms in an attempt to draw a line under recent troubles, a Russian government report accused the oil giant of environmental vandalism.

The report last week strongly criticised Shell's venture for destroying the land around riverbanks on the island of Sakhalin, north of Japan. Moscow warned of possible fines.

Hundreds of indigenous people blockaded roads leading to Shell's Sakhalin Energy oil and gas facilities last week as protests grew over the alleged damage.

The project is two years late and £1bn over budget, but its success is essential to Shell, which has faced criticism over the past two years for its failure to find new reserves.

Last week, Shell escaped criminal charges in America for overstating reserves and chief executive Jeroen van der Veer told Financial Mail he wanted to put the scandal behind him.

The Sakhalin-2 project involves running a pipeline 500 miles to carry gas and oil from rigs off the north of the island to a port in the south. But the pipeline crosses 1,100 rivers, many rich in salmon.

The pollution caused by diverting rivers and destroying riverbanks has already led to damage to salmon-breeding grounds and has threatened the vital fishing industry.

Three months ago, Shell was forced to reroute the pipeline, which could eventually pump 140,000 barrels of oil a day, because it threatened the feeding grounds of the Western Grey Whale. There are thought to be only 100 left. The company halted work for studies into the project's environmental impact.

Shell said: 'There is suspension on the work around the rivers to allow for more training for contractors on environmental matters.' Malcolm Brinded, executive director of Shell Exploration & Production, met protesters from Russia who visited London last week to complain about the damage that Shell had allegedly inflicted on the environment.

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It has also emerged that the European Bank for Reconstruction & Development, which has so far refused to fund part of the project, is sending a team to the island next month for the second time.

Shell desperately needs funding for the project and many banks look to the EBRD for guidance on whether to invest.

Financial Mail revealed last year that Shell had exaggerated the charity work it had done to help the community in Nigeria, where it has faced savage criticism for causing pollution and failing to stop human rights violations.

The era of the domination of North Sea gas comes to an end tonight when a tanker berths at National Grid's new £130 million terminal on the Isle of Grain, Kent. The ship, above, is carrying 31 million cubic metres of liquid natural gas from Algeria - enough to supply 47,000 homes for a year. As North Sea supplies start to dwindle, Britain will depend more on dearer LNG from areas such as Egypt and Algeria.