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UpsteamOnline: Controversial cancellation by ministry sets off investment alarm bells

THE move by Russia’s Natural Resources Ministry to cancel its approval of the environmental endorsement of Sakhalin 2 was met with a wave of concern from politicians both in the East and West, writes Valdimir Afanasiev.

The European Commission said it was taking Russia’s withdrawal of the permits “very seriously” and called on Moscow to guarantee a secure and predictable investment climate.

EU Energy Commissioner Andris Piebalgs called on Russia to make its rules clear.”In order to ensure that companies are willing to invest in multi-billion euro energy projects, a secure and predictable investment climate is necessary in Russia as in the EU or indeed any country,” he said. “Without this, investment in new energy projects will be highly problematic, providing uncertainties for the world’s future energy supply.”

Japan’s Prime Minister-in-waiting Shinzo Abe said that a major delay to Sakhalin could hurt diplomatic relations and the UK government said it was “deeply concerned” by the Russian move.

The head of the International Energy Agency, Claude Mandil, said Russia’s investment climate could suffer.

Within Russia, gas monopoly Gazprom said it had suspended asset swap talks with Shell because of uncertainty over Sakhalin 2.

Last year, Shell and Gazprom signed a memorandum of understanding under which they agreed to work on a deal that would give Gazprom a 25% stake in Sakhalin 2 at the expense of Shell, which currently holds a 55% stake. In return, Gazprom would give Shell a 50% shareholding in the project to develop gas from deep reservoirs at the Zapolyarnoye gas field in west Siberia.

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