The European Bank for Reconstruction and Development has revealed that it will no longer consider financing the Sakhalin II project, following a significant change in the ownership of the Sakhalin Energy Investment Company.

Sakhalin Energy’s shareholders, Shell, Mitsui and Mitsubishi, had asked the European Bank for Reconstruction and Development (EBRD) to partially finance the $20 billion project, which will produce offshore gas and oil from Russia’s far eastern coast.

Although EBRD had been considering the request for the past five years and had collaborated with Sakhalin Energy in ensuring that the project could meet the bank’s environmental standards, it had not yet taken any decision on whether to make the investment.

According to the bank, however, since Russian state-owned energy company Gazprom acquired a majority stake in Sakhalin Energy, the shareholders and the structure of the company have changed to the extent that it is not feasible for the EBRD to pursue the current project.

The EBRD has said that, if the new group of shareholders were to renew the financing request and make a case that the project could be eligible for EBRD investment, the bank could consider financing in the future.

The EBRD made approximately 30% of its 2006 investments in Russia, more than any other country among the 29 countries where it operates. Even so, Russia’s share of EBRD investments is forecast to continue to increase in 2007.