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Asahi Shimbun: Japan’s ambassador immediately protested Russia’s decision to suspend Sakhalin II project

MOSCOW–Japan’s ambassador immediately protested Russia’s decision Monday to suspend the Sakhalin II gas and oil project, telling the country’s natural resources minister that the act was unjustified.

Published: Sep 20, 2006

Two Japanese trading houses together own 45 percent of the development

Russia’s Natural Resources Ministry revoked the approval for Sakhalin II that was granted in 2003

The decision is expected to suspend all project activities for the time being, possibly further delaying the project, which is already one year behind schedule. The latest target for the start of production and export of liquefied natural gas is 2008

In a meeting with Yasuo Saito, Japanese ambassador to Russia on Monday, Russian Natural Resources Minister Yurii Trutnev cited Sakhalin Energy Investment Co.’s violations of environment laws

Trutnev said the company will have to submit documents required to resume the project to the Federal Supervisory Natural Resources Management Service, an organ under the Natural Resources Ministry. Some sources said the process could take about one year

The project operator Sakhalin Energy is 55 percent owned by Royal Dutch/Shell Group. Mitsui & Co. owns 25 percent, and Mitsubishi Corp. 20 percent

In a statement on Tuesday, Sakhalin Energy said the Russian government’s decision “could be damaging for the project and for Russia and lead to delays in project development.” In Tokyo, Chief Cabinet Secretary Shinzo Abe said the government will consider what it can do after consulting with the Japanese companies involved

“I am concerned that a significant delay in the project, which symbolizes cooperation between Japan and Russia, would adversely influence the overall relationships between the two countries,” he told a news conference on Tuesday

Abe said the government has already called on the Russian government to ensure fair and transparent procedures and a smooth implementation of the project

Toshihiro Nikai, the minister of economy, trade and industry, on Tuesday visited Russian ambassador to Japan Alexander Losyukov and called for cooperation in promoting the project

According to Russia’s Interfax news agency, Trutnev told Saito on Monday that the Russian government found illegal deforestation at 54 sites for gas and oil pipeline construction

He also said Sakhalin Energy failed to observe the recommendations issued by the Federal Supervisory Natural Resources Management Service three years ago

Japanese industry officials and analysts suspect, however, that Russia’s real motive is to tighten control over its energy resource development

In Sakhalin II, the government is trying to help Gazprom, a government-affiliated natural gas monopoly, gain advantage in ongoing negotiations with the Shell group, the sources said

Gazprom has been in talks with Shell to obtain a stake of 25 percent or more in Sakhalin Energy by swapping its interests in western Siberian gas fields for part of Shell’s Sakhalin holding. No agreement has been reached, however

Industry officials and analysts also said the Russian government does not intend to terminate Sakhalin II.

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