International Herald Tribune: Russia raises pressure on Sakhalin-2

Bloomberg News, Reuters
Published: October 25, 2006
 
YUZHNO-SAKHALINSK, Russia Russia has prolonged the environmental inspection of the $22 billion Sakhalin-2 project by Royal Dutch Shell, the Russian natural resources minister said Wednesday, adding that the oil and natural gas enterprise could face prosecution for transgressions.
 
“The breaches at Sakhalin-2 fall under five articles of the criminal code,” the minister, Yuriy Trutnev, said at a meeting with environmental inspectors and officials from Sakhalin Energy, the company that operates Sakhalin-2.
 
“This falls under criminal law, and we think it’s necessary to apply it,” Trutnev said. “All the relevant documents should be sent to the prosecutor general within two weeks.”
 
Trutnev said the inspection of the vast project on the Russian island of Sakhalin would continue for a month longer than originally planned and cited illegal felling of trees as one of the violations.
 
Contractors should stop construction work at several sites along oil and natural gas pipelines, he said.
 
The pipelines are scheduled to ship oil year-round to an export terminal and to a plant that will liquefy gas for shipment to Japanese and South Korean customers. Nearly all of the liquefied natural gas output, which is scheduled to start in 2008, has already been sold.
 
The regional authorities may ask for the Sakhalin-2 water-use license to be revoked, which would halt work, Trutnev said. The project, led by Shell, has caused an estimated $100 million of pollution and damage to water resources on the island, according to Dmitry Belanovich, the acting chief of the Sakhalin environmental inspectorate.
 
Analysts have said the environmental agency’s activities are designed to put pressure on Sakhalin-2 and increase Kremlin control over the Russian energy sector.
 
Shell, BP, Exxon Mobil and Total face demands from Russia to cede some control of oil and natural gas fields to state- aligned companies like Gazprom. European and Japanese leaders have raised concern that the determination by President Vladimir Putin to bolster control on those industries could undermine the reliability of Russian energy supplies.
 
Ian Craig, chief executive of Sakhalin Energy, of which Shell is the majority owner, said the company was committed to resolving any breaches.
 
“We are bound by our commitments, and we will hold to our obligation to guarantee that all works are carried out to the highest environmental standards,” Craig said.
 
Inspectors from RosPrirodNadzor, the Russian environmental regulator, had been expected to release a list of alleged environmental violations at the meeting but said they needed another month, which Trutnev granted.
 
Belanovich, the acting chief of the environmental inspectors, said the execution of the project had changed so much since the feasibility study that further investigations were needed.
 
“There are so many changes and additions to the project plan that they are no longer conforming to the agreed plan and the state environmental review,” Belanovich said. $@
 
 YUZHNO-SAKHALINSK, Russia Russia has prolonged the environmental inspection of the $22 billion Sakhalin-2 project by Royal Dutch Shell, the Russian natural resources minister said Wednesday, adding that the oil and natural gas enterprise could face prosecution for transgressions.
 
“The breaches at Sakhalin-2 fall under five articles of the criminal code,” the minister, Yuriy Trutnev, said at a meeting with environmental inspectors and officials from Sakhalin Energy, the company that operates Sakhalin-2.
 
“This falls under criminal law, and we think it’s necessary to apply it,” Trutnev said. “All the relevant documents should be sent to the prosecutor general within two weeks.”
 
Trutnev said the inspection of the vast project on the Russian island of Sakhalin would continue for a month longer than originally planned and cited illegal felling of trees as one of the violations.
 
Contractors should stop construction work at several sites along oil and natural gas pipelines, he said.
 
The pipelines are scheduled to ship oil year-round to an export terminal and to a plant that will liquefy gas for shipment to Japanese and South Korean customers. Nearly all of the liquefied natural gas output, which is scheduled to start in 2008, has already been sold.
 
The regional authorities may ask for the Sakhalin-2 water-use license to be revoked, which would halt work, Trutnev said. The project, led by Shell, has caused an estimated $100 million of pollution and damage to water resources on the island, according to Dmitry Belanovich, the acting chief of the Sakhalin environmental inspectorate.
 
Analysts have said the environmental agency’s activities are designed to put pressure on Sakhalin-2 and increase Kremlin control over the Russian energy sector.
 
Shell, BP, Exxon Mobil and Total face demands from Russia to cede some control of oil and natural gas fields to state- aligned companies like Gazprom. European and Japanese leaders have raised concern that the determination by President Vladimir Putin to bolster control on those industries could undermine the reliability of Russian energy supplies.
 
Ian Craig, chief executive of Sakhalin Energy, of which Shell is the majority owner, said the company was committed to resolving any breaches.
 
“We are bound by our commitments, and we will hold to our obligation to guarantee that all works are carried out to the highest environmental standards,” Craig said.
 
Inspectors from RosPrirodNadzor, the Russian environmental regulator, had been expected to release a list of alleged environmental violations at the meeting but said they needed another month, which Trutnev granted.
 
Belanovich, the acting chief of the environmental inspectors, said the execution of the project had changed so much since the feasibility study that further investigations were needed.
 
“There are so many changes and additions to the project plan that they are no longer conforming to the agreed plan and the state environmental review,” Belanovich said.