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RIA Novosti: Shell aims to save its Sakhalin II project during minister visit

15:27 | 17/ 10/ 2006 

MOSCOW, October 17 (RIA Novosti) – Oil major Royal Dutch Shell, which is leading the vast Sakhalin II oil and gas project in Russia’s Far East, said Tuesday it will demonstrate to Russian authorities during a minister’s visit to the region next week that it has tackled the environmental infringements of which it is accused.

The Sakhalin II project, being implemented under a production-sharing agreement dating back to 1994, has faced accusations of inadequate safety, massive volumes of waste disposal, seismic threats, erosion, and threats to marine life.

Natural Resources Minister Yury Trutnev will head a delegation to the Far East island on October 24-26, with officials from Russia’s environmental watchdog, representatives of presidential envoys in Siberia and the Far East, and prosecutors. The delegation will examine the results of environmental inspections into the $20 billion project.

Chris Finlayson, head of Shell Russia, said 90% of the violations of which the company is accused by Russia’s environmental watchdog (the Federal Service for the Oversight of Natural Resources) relate to an 800-kilometer (500 miles) oil pipeline, where Shell has already suspended work on several stretches. The company representative said allegations of environmental damage at Aniva Bay, near the village of Prigorodnoe, were mere speculation.

On September 18, the Natural Resources Ministry annulled its own 2003 Sakhalin Environmental Expert Review (SEER), which gave the project a positive evaluation, following action from prosecutors. But it has yet not formally implemented its decision.

In a bid to enforce the annulment, the environmental agency on Tuesday filed a lawsuit against the Natural Resources Ministry.

A Moscow district court refused to consider the agency’s lawsuit.

The environmental agency’s deputy head Oleg Mitvol, who is leading a probe into the project, said in September that a stretch of pipeline has been illegally routed through the territory of a national preservation area, in violation of conditions set out in its feasibility study.

He said on Monday that billions of dollars would be needed to clean up the environmental impact in the Aniva Bay caused by Sakhalin II.

Mass fish and crab deaths have been reported in the area, and inspectors earlier established that a vessel dumped a mixture of methylene dichloride and lubricating oil into the bay.

A spokesman for the Russian Natural Resources Ministry said earlier that the project might have caused ecological damage worth $50 billion, but said it will take a long time to make detailed calculations.

The Sakhalin II project, which is run by the Sakhalin Energy Investment Company formed by Royal Dutch Shell (55%) and Japan’s Mitsui (25%) and Mitsubishi (20%), comprises an oil field with associated gas, a natural gas field with associated condensate production, a pipeline, a liquefied natural gas plant and an LNG export terminal. The two fields hold reserves totaling 150 million metric tons of oil, and 500 billion cubic meters of natural gas.

Sakhalin Energy said prior to the revocation of the study that accusations about environmental performance were “deeply misleading,” and were “based on a procedural argument relating to the internal workings and mandate of component agencies making up the Ministry of Natural Resources.”

The possible suspension of the project following the revocation of the environmental review means plans to develop a crucial LNG plant will be delayed, which will put in jeopardy contracted deliveries to Japan, South Korea and the United States, due to start in 2008.

Shell announced last year that the estimated cost of the project implemented under a production-sharing agreement had doubled. The cost increase has complicated state-controlled energy giant Gazprom’s bid to swap one a share in one its fields for 25% of Sakhalin II. and its sister non-profit websites,,,,,, and are owned by John Donovan. There is also a Wikipedia feature.

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