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BBC News: Royal Dutch Shell Plc faces Russia legal pressure

BBC Sakhalin article Sept 2006

Russian prosecutors have said that Royal Dutch Shell’s giant oil and gas project off the island of Sakhalin was illegally given environmental approval.

The statement comes after a Russian environmental group called for the Pacific Ocean scheme to be blocked.

Western analysts say the move by the Russian Prosecutor General’s Office is the latest attempt to pressure Shell to open up the field to Russian firms.

Shell said it could not comment until it had seen the prosecutors’ documents.

Court case

Shell has already said it is in talks to give Russia’s Gazprom a 25% stake in the Sakhalin 2 scheme.

At present, Sakhalin 2 is Russia’s only energy project that does not involve any Russian firms.

Anglo-Dutch Shell currently has a 55% stake in the $20bn (£10.5bn) development, with the other shareholders being Japan’s Mitsui, which has a 25% share, and Mitsubishi, with 20%.

A court case on the matter of Sakhalin 2’s environmental approval is now due to start on 21 September.

Giant scheme

Although the Sakhalin 2 field is already producing a small amount of oil, it is not yet fully on stream, with gas shipments not due to begin until 2008.

It is estimated to have total reserves of about one billion barrels of oil and 500 billion cubic metres of gas, making it one of the world’s largest combined oil and gas projects.

Shell is said to see Sakhalin 2 as vital to building its business in Japan, China and Korea.

The company has spent millions of dollars assessing the social and environmental impact of the development, and insists that it “complies fully with Russian and international environmental standards”.

The project involves the construction of two large offshore platforms, while two 800km pipelines are being laid to carry oil and gas onshore for processing.

Although analysts insist Moscow’s objections to Sakhalin 2 are political, the project has attracted opposition from Western environmental groups due to its proximity to a breading ground for rare grey whales.

The separate Sakhalin 1 development is being led by US firm Exxon Mobil.

Story from BBC NEWS:

Published: 2006/09/18 10:26:34 GMT

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