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Reuters: Shell halts Sakhalin Energy pipeline work – paper

Mon Aug 28, 2006 1:03am ET

MOSCOW, Aug 28 (Reuters) – The Shell-led (RDSa.L: Quote, Profile, Research) Sakhalin Energy project on the Russian island of Sakhalin has stopped work on building two onshore pipelines after criticism in an environmental report, Kommersant newspaper said on Monday.

Kommersant said the $20 billion project had stopped building a gas pipeline and an oil pipeline on the 1,572 km (977-mile) route between its field and its liquefied natural gas (LNG) plant and oil export terminal on the south of the island.

“Work won’t restart until we are sure that our contractors and subcontractors completely share our readiness to strictly observe the construction standards set out out in Russian law,” the paper quoted an unnamed project official as saying.

The official said recent monitoring by Russia’s environmental watchdog had uncovered several breaches of the rules. The watchdog, Rosprirodnadzor, completed its review last week, but has not yet published its conclusions.

Earlier this month, the body’s deputy head Oleg Mitvol, known for strident public announcements, said Sakhalin Energy should stop building onshore pipelines as they could be destroyed by mudflows.

Nobody at Sakhalin Energy was immediately available to comment on Monday. A Shell spokesman declined to comment.

Sakhalin Energy is already producing over 70,000 barrels of oil per day for around half the year, but plans to more than double that output all year round when its platforms and pipelines are fully up and running.

It plans to ship its first cargo of LNG, which will be the mainstay of the project, in mid-2008.

Sakhalin Energy, in which Royal Dutch/Shell (RDSa.AS: Quote, Profile, Research) is a 55 percent shareholder, is Russia’s biggest foreign investment project and the world’s largest LNG development.

The other shareholders are Japan’s Mitsui & Co. Ltd. (8031.T: Quote, NEWS, Research) and Mitsubishi Corp (8058.T: Quote, NEWS, Research). Russia’s gas giant Gazprom (GAZPPE.RTS: Quote, Profile, Research) has signed a memorandum of understanding to take a 25 percent stake.

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