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Bloomberg: Shell’s Sakhalin Project to Be Inspected by Official (Update1)

By Torrey Clark

Sept. 25 (Bloomberg) — Oleg Mitvol, the Russian official who is pushing to revoke Royal Dutch Shell Plc’s environmental permit for its Sakhalin-2 oil and gas project, will inspect the project this week for environmental damage.

Mitvol, the deputy head of the Natural Resources Ministry’s environmental inspectorate, will tour the project’s overland pipeline construction site by helicopter and meet with officials from Shell’s project operator, Sakhalin Energy, the ministry said in an e-mail today.

Russia is stepping up pressure on projects run by Shell, Exxon Mobil Corp. and Total SA under production-sharing accords, which grant the state a share of oil revenue after the companies recover costs. Shell announced a $10 billion cost increase in the project last year, one week after agreeing to an asset swap that would give state-controlled OAO Gazprom a 25 percent stake in the project. Russia has not yet approved the cost increase.

The Natural Resources Ministry last week signed off on an order to revoke the environmental approval for the part of Shell’s Sakhalin-2 project that is now under construction, which includes oil and gas pipelines that cross Sakhalin Island. The ministry is waiting for the federal industrial safety service, Rostekhnadzor, to approve the order before it takes legal effect.

Mitvol will visit Sakhalin Island from Sept. 27 to Sept. 30. Mitvol will be inspecting the Sakhalin sites with representatives of environmental organizations and possibly officials from the British, German, Japanese, U.S., Dutch and South Korean embassies, the ministry said.

The head of Rostekhnadzor, Konstantin Pulikovsky, will travel to Sakhalin and the Far East for meetings with the heads of local divisions to discuss their inspections of sites in the region, the service said in an e-mail today. Pulikovsky, who used to be President Vladimir Putin’s representative in the Far East, will also attend an oil and gas conference on Sakhalin Island.

To contact the reporter on this story: Torrey Clark in Moscow at [email protected]

Last Updated: September 25, 2006 09:15 EDT

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