Agence France-Presse, The Associated Press
Published: September 27, 2006
SOCHI, Russia President Vladimir Putin of Russia warned Wednesday that the authorities would take action against “unconscientious” oil and gas companies that failed to fulfill their license obligations.
Putin made his remarks at a meeting with Yury Trutnev, the natural resources minister, amid tensions between the state and Western energy investors, particularly over the Sakhalin-2 oil and gas project in the Russian Far East.
“I expect the ministry and the government as a whole to make such decisions, including as regards companies that work unconscientiously or do not fulfill license agreements,” Putin said.
Meanwhile, the Russian foreign minister said Wednesday that the environmental checks being conducted at the project would not necessarily lead to the revoking of the project’s license.
The minister, Sergey Lavrov, speaking at the first day of an international oil and gas forum on the island, intended his comments to reassure Western governments that have been rattled by a decision to pull a key environmental permit at the project, where liquefied natural gas supplies have already been contracted 20 years ahead.
“The checks that are being carried out by no means signify that the licenses for exploration as part of the Sakhalin-2 project will be revoked,” Lavrov said in remarks televised from the oil and gas forum on Sakhalin, an island in Eastern Russia. “The aim of the checks is solely to ensure that all sides abide by the terms of the agreement in good faith.”
Last week, the Natural Resources Ministry announced it would revoke the environmental permit at Sakhalin- 2, provoking an international outcry over fears that work could be halted at the $20 billion development.
On Tuesday, Trutnev said that the ministry would conduct a monthlong review of the project. If Sakhalin Energy, the consortium led by Shell that includes the Japanese firms Mitsui and Mitsubish, fails to present satisfactory proposals to overcome numerous environmental violations, work would be frozen, Trutnev said.
Observers interpreted the move as a means to pressure the company to secure better terms for the state gas monopoly Gazprom, which is seeking to join the project.
But Lavrov strongly denied those suggestions.
“Statements about some sort of a revision of production-sharing agreements and especially about a squeezing out of foreigners from the Russian fuel and energy sector are groundless,” he said.
Ian Craig, the Sakhalin Energy chief executive, expressed confidence Wednesday that the project would not be interrupted. The permit, he said, was “highly unlikely to be revoked.”
Sakhalin-2 is one of a handful of so- called production-sharing agreements that were struck in the early 1990s when Russia was desperate for foreign investment to help develop its reserves. The deals offered Western oil companies control in the projects as well as lucrative tax breaks.
But now that Russian finances have been transformed thanks to high energy prices and state control in the oil sector is rising, the government appears to be reconsidering the projects.