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AFX News Limited: Russia alleges violations of safety rules at Sakhalin 2 site

09.27.2006, 12:08 AM

YUZHNO-SAKHALINSK, Russia (XFN-ASIA) – Russian officials warned that safety rules have been violated at the the Sakhalin-2 oil and gas site, a week after Moscow revoked environmental authorisation for the project of Royal Dutch Shell and Japanese firms Mitsui and Co and Mitsubishi Corp.

‘There have been quite a lot of violations of industrial safety rules … this worries our inspectors,’ Konstantin Pulikvosky, head of the environmental, engineering and nuclear monitoring agency Rostekhnadzor told an energy conference here.

The decision to revoke authorisation for the project has led to international protests with Yasuo Saito, Japan’s ambassador to Moscow calling the Russian government action ‘one-sided, and lacking in ‘procedural transparency.’

Japanese utilities have already bought future contracts for liquefied natural gas from the project, with deliveries expected to start in 2008.

Russian Foreign Minister Sergei Lavrov, who is expected to address the conference, said earlier that agreements with foreign oil majors would not be scrapped but that the companies should ‘fulfil their obligations.’

Ian Craig, head of the Sakhalin Energy consortium that is developing the project, called for dialogue with Russian authorities and said government action was ‘not very helpful.’

The consortium has warned the dispute could delay the venture and upset customers in Asia.

Some energy analysts allege that Russia wants to pressure Sakhalin Energy and force the consortium to sell a large share in the project to state gas monopoly Gazprom at a good price.

Shell owns a 55 pct stake in Sakhalin Energy while Mitsui and Co and Mitsubishi Corp hold 25 pct and 20 pct respectively.

Russia’s state gas monopoly Gazprom has been in talks to buy 25 pct of the project.

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