YUZHNO-SAKHALINSK, Russia - Russia on Wednesday extended by a month an
environmental audit at a troubled multi-billion-dollar energy project in the
country's Far East led by Royal Dutch Shell PLC.
The decision, announced by Russia's natural resources minister as he visited
the Pacific island of Sakhalin to inspect the project, delayed any immediate
threat to the venture.
"At the end of November, we will finish our audit of Sakhalin-2," Yuri
Trutnev said.
The day before, on a visit to the oil town of Nefteyugansk
in Western Siberia, Trutnev reiterated a warning that environmental violations at
the US$22 billion Sakhalin-2 liquefied natural gas project could lead
to its license being revoked.
Analysts have suggested the Kremlin is seeking to secure better terms for
state natural gas monopoly OAO Gazprom to enter the project and reshape the
deal, which allows Shell to wait until it is comfortably in the black before
splitting profits with the state.
A handful of other Western companies that signed similar agreements in the
1990s giving them control of energy projects at a time when Russia lacked the
money to develop them have also come under pressure as the Russian government
seeks to reclaim a dominant state role in the strategic oil and gas sector.
On Tuesday, Trutnev said an Arctic oil field being developed by France's
Total SA had "violations many times over," although it was in no danger, at
least not immediately, of losing licenses to develop the Kharyaga field in the
Nenets region.
President Vladimir Putin, speaking Friday in Finland, said he was optimistic
his government would reach an agreement with Shell but said Russia was unwilling
to agree to a doubling of its costs.
Royal Dutch Shell infuriated the Russian government when it said last year
it would double the costs at the project it leads to nearly US$22 billion - the
original so-called production sharing agreement allows the company and its
partners to recoup all expenses before sharing any profits with the Russian
state.
Regulators last month froze a key environmental permit at Sakhalin-2, and
Trutnev on Wednesday lashed out at what he called "multiple violations of
environmental legislation."
The Russian minister was meeting on the Pacific island with representatives
of the Sakhalin-2 consortium, which also includes Japanese companies Mitsubishi
Corp. and Mitsui & Co., as well as with officials from the Russian
environmental watchdog.
Trutnev said on Friday that he had received a letter from the head of the
consortium last week assuring him that the violations, which include illegal
logging, water pollution and soil erosion had been or would be addressed.
The company is due to present a final plan for rectifying the violations this
week. Meanwhile, the head of Shell's Russian operations, Chris Finlayson,
expressed confidence that work on the project would go ahead according to
schedule, with the first LNG shipment due to leave the island in summer 2008.
Stepping up the pressure, Trutnev said that the violations breached at least
5 articles of the Russian Criminal Code and that case material would be
forwarded to the Prosecutor General's office.
He added that the environmental watchdog had 4 months to
assess damages caused by the environmental violations.
