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kommersant (Moscow): Sakhalin Energy Suspends Construction

Sakhalin Energy that is the subsidiary of British-Dutch Shell and the Sakhalin-2 operator has suspended construction of some of the ground-surface pipelines. The official reason is that the company itself revealed violation of technical provisions. But more likely than not, it is the response to Federal Service for Natural Resources Supervision that harbors doubts about ecological safety of the project and which claims could be used by Gazprom to get 25 percent in Sakhalin Energy.

Sakhalin Energy representatives said the company suspended construction of two ground-surface pipelines in the dangerous landslide area of Makarovsky uplift of the Sakhalin Island, as the recent inspection revealed some cases of technical provisions’ violation by the subcontractor. The dates of the project won’t be affected, they pointed out.

By strange coincidence, Russia’s Federal Service for Natural Resources Supervision completed its check on the oil/gas pipelines past week. The results haven’t been disclosed so far, but Oleg Mitvol, who is the deputy chief of this supervisory authority of Russia, announced in early August that, according to his data, Sakhalin Energy failed to take all actions required to eliminate the danger of the mud flow.

It is Russia’s state monopoly, Gazprom, that benefits from close attention paid by the Federal Service for Natural Resources Supervision to the project. Since 2005, Gazprom has been negotiating with Shell the transfer of 25 percent in Sakhail-2 and the claims of federal authorities may curtail the price of the asset.

Sakhalin-2 project is carried out under the Product Sharing Agreement (PSA). Its operator is Sakhalin Energy that is a venture of Royal Dutch/Shell (55 percent), Japanese Mitsui (25 percent) and Mitsubishi (20 percent). The developed fields are Piltun-Astokhskoe and Lunskoe with recoverable resources estimated at 150 million tons of crude and 500 billion cu meters of gas. First deliveries of LNG are slated for summer of 2008.

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