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RIA Novosti: Gazprom, Sakhalin Energy working to repair eco-damage on Sakhalin-II

21:39 | 21/ 02/ 2007 

MOSCOW, February 21 (RIA Novosti) — Gazprom [RTS: GAZP] and Sakhalin Energy, operator of the Sakhalin II oil and gas project off Russia’s Pacific Coast, are working to remedy environmental damage caused by the project, a Gazprom official said Wednesday.

The ambitious project, formerly led by Shell, was subjected to months of intense pressure last year from Russian authorities, who accused it of causing serious environmental damage to Sakhalin Island, including deforestation, toxic waste dumping and soil erosion.

Alexander Medvedev, deputy chairman of Gazprom’s board of directors, said the companies have developed a plan to repair the eco-damage and are in negotiations with the Ministry of Natural Resources, the Federal Service for the Oversight of Natural Resources (Rosprirodnadzor), and other agencies concerned.

Assessment of the damage caused by Sakhalin II could be completed by late summer 2007, a deputy head of Russia’s environmental watchdog said last Wednesday.

“We promised to conduct work [damage assessment], which is rather complicated, before the end of summer,” Oleg Mitvol said.

He said the results of the assessment will depend on how exhaustive the operating company’s proposals to remedy the situation will be.

Earlier, Russia’s Audit Chamber assessed the environmental damage inflicted by the project, off Russia’s Pacific Coast, at $5 billion.

In December 2006, Gazprom acquired a 50% plus one share in the Sakhalin II liquefied natural gas project for $7.45 billion.

Anglo-Dutch oil major Shell previously held a 55% stake, while Japan’s Mitsui and Mitsubishi owned 25% and 20%, respectively. The operator’s raising of its project cost estimate to $22 billion infuriated Russian authorities, since under the production-sharing agreement behind the project signed in the 1990s, Russia will only receive a profit once the operator has recouped all its costs.

Sakhalin II comprises an oil field with associated gas, a natural gas field with associated condensate, a pipeline, a liquefied natural gas plant, and an LNG export terminal. Most of the LNG from the project will be exported to Japan, which is seeking to diversify its energy imports.

The project’s two fields have estimated reserves of 150 million metric tons (1.1 billion barrels) of oil and 500 billion cubic meters of natural gas.

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