The Guardian: Russia gives out mixed messages to Shell and BP

Terry Macalister and Tom Parfitt
Tuesday September 26, 2006

Western oil companies were in confusion about the investment climate in Russia last night after the government appeared to soften its position with Shell but opened a new line of attack against BP.

Yuri Trutnev, natural resources minister, said there would be a full inquiry into environmental problems at Shell’s $20bn Sakhalin-2 scheme but insisted the operating permit was safe – for now.

“There is no question of removing the licence because of the result of the investigations. The inspection should only examine whether the operator is abiding by the environmental protection legislation,” said Mr Trutnev.

Ministry officials told the Guardian there was no immediate threat of stopping the project but the review could still lead to such a conclusion and involve millions of pounds’ worth of environmental improvements being demanded of Shell.

But in a separate development, the prosecutor general’s office summoned Valery Pak, the boss of Rusia Petroleum, TNK-BP’s operating company at the giant Kovytka gas field in Siberia, and expressed grave concern about its environmental impact.

“Pak was warned that if the breaches of legislation are not remedied in a stated time, the prosecutor’s office will apply to the federal subsoil-use agency for a cessation of Rusia Petroleum’s right to exploit the Kovytka deposit,” it said.

TNK-BP insisted that it had all the necessary permits and had satisfactory environmental reviews. “I’m not sure what to make of this,” said Bob Dudley, TNK-BP’s chief executive.

The two cases, which involve large, strategic oil and gas projects, mirror each other because Russia’s state-owned Gazprom has been trying to encourage the western companies to give it a stake.

The row over Sakhalin has been seen by many analysts within Russia, as well as observers outside, as an attempt by the Russian state to take further control over energy projects on its soil.

The natural resources ministry had earlier warned Shell that its environmental permit would be removed at the same time as state-owned Gazprom was manoeuvring to buy a 25% stake in Sakhalin-2. The ministry insists these two issues are not related and argues it had long-held reservations about the impact of the Shell project on the local environment.

Britain, the European Union and Japan have expressed concern about what is happening. The Kremlin has been warned before by the west about using energy as a political weapon.

Some of these concerns have been shared by international “green” groups such as Friends of the Earth and have been used to put pressure on the European Bank for Reconstruction and Development not to fund the project. Yesterday the campaign group Bankwatch issued a report on Sakhalin, claiming the scheme had brought an upsurge in violence and other social problems.

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