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Posts on ‘October 25th, 2006’

The Wall Street Journal: Oil News Roundup: October 25, 2006 4:30 p.m.

THE WALL STREET JOURNAL ONLINE
October 25, 2006 4:30 p.m.

Crude-oil futures surged above $61 a barrel on the New York Mercantile Exchange, their highest close since Oct. 9, after the Department of Energy said U.S. crude stockpiles unexpectedly fell and gasoline demand rose amid falling pump prices. Here’s Wednesday’s roundup of oil and energy news:

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RUSSIA EXTENDS SAKHALIN PROBE: Russia extended by a month an environmental audit at a troubled multibillion-dollar energy project led by Royal Dutch Shell. A monthlong inspection of the project uncovered hundreds of millions of dollars worth of damage to the local environment, the head of the local state environmental watchdog told Mr. Trutnev. Analysts have suggested the Kremlin is seeking to secure better terms for state natural-gas monopoly OAO Gazprom to enter the project and reshape the deal with Shell.

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Reuters: Russia prolongs Shell project probe, may prosecute

Wed Oct 25, 2006 11:31 AM ET
By Mikhail Yenukov

YUZHNO-SAKHALINSK, Russia (Reuters) – Russian Natural Resources Minister Yuri Trutnev heaped more pressure on Shell’s Sakhalin-2 project on Wednesday with an order for a prolonged environmental probe and a threat of prosecution.

At a meeting with environmental inspectors and project operator Sakhalin Energy on Sakhalin Island in the Pacific, Trutnev said he wanted criminal prosecutors to investigate the environmental record of the $22 billion venture.

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New York Times: Shell Could Face Criminal Charges in Russia

Sakhalin II

(Joseph Sywenkyj for The New York Times
Shell’s $22 billion Sakhalin 2 project, under construction on Sakhalin Island, will have about 500 miles of natural gas and oil pipelines.)

October 26, 2006
By ANDREW E. KRAMER

MOSCOW, Oct. 25 — A Russian official threatened criminal prosecutions against employees of Royal Dutch Shell, ratcheting up pressure on the company’s $22 billion oil and gas project on Sakhalin Island on Wednesday.

The remarks suggested a further unraveling of the relationship between Western energy companies and the Russian government, which is intent on gaining control of the energy sector.

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BBC News: Sakhalin operator ‘breaking law’

BBC Sakhalin photo

Russia’s environmental agency has asked for an extra month to probe the Sakhalin-2 oil and gas project and has warned it may prosecute its operator.

Natural resources minister Yuri Trutnev said that environmental breaches at the project, led by Anglo-Dutch energy giant Shell, broke five criminal codes.

Earlier this week Russia reiterated that it could withdraw Shell’s licence for the $22bn (£11.7bn) project.

But operator Sakhalin Energy insisted the probe would not delay its launch.

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Oil & Gas Journal: Several Sakhalin-2 pipeline work sections halted

Eric Watkins
Senior Correspondent

LOS ANGELES, Oct. 25 — Construction on several sections of the Sakhalin-2 onshore pipeline system has to be halted, according to Russian Natural Resource Minister Yury Trutnev, who said the project continues to violate environmental legislation.

“Here we need to consider halting construction on several parts of the pipeline. I do not think that it will be correct to halt the project entirely, but we have to demand compliance with environmental legislation,” Trutnev told reporters Oct 25.

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Financial Post – Canada: Russia’s focus on environment seen as attempt at control: Energy

Published: Oct 25, 2006

MOSCOW – Russian environmental prosecutors are considering cancelling licences for 17 oil companies, including a subsidiary of state oil firm Rosneft, a top environmental official said yesterday. “Cases have been forwarded to the environmental prosecutor for review regarding 17 companies,” including Rosneft-Purneftegaz and shattered oil major Yukos, news agency ITAR-TASS quoted Sergei Sai, the head of environmental monitoring agency Rosprirodnadzor, as saying. Rosneft-Purneftgaz may lose five licences as a result of the cases, Mr. Sai said.

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Associated Press: Russian President Won’t Seek 3rd Term

EXTRACT: Several Western oil companies that control energy projects in Russia have come under intense environmental scrutiny in recent months, which analysts say reflects a Kremlin drive to increase the state role in the strategic oil and gas sector. Foreign projects facing pressure include Sakhalin-2, a multi-billion-dollar liquefied natural gas development led by Royal Dutch Shell PLC. “Environmental agencies in collaboration with ecological non-governmental organizations will thoroughly monitor compliance with current legislation,” Putin said.

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RIA Novosti: Operator, govt. to draw joint plan to undo Sakhalin II eco-damage

15:30 | 25/ 10/ 2006   
 
YUZHNO-SAKHALINSK, October 25 (RIA Novosti) – Russia’s natural resources minister and the company operating the vast Sakhalin II energy project in the country’s Far East agreed Wednesday to draw up a joint action plan to repair the environmental damage it has caused.

Sakhalin Energy CEO Ian Craig, who has admitted that his Shell-controlled company committed grave violations in developing the project, told reporters following a face-to-face meeting with Yury Trutnev that the two of them have agreed to work in close cooperation to repair the damage inflicted on the country’s largest island, off the Pacific coast.

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Calgary Sun, Canada: Shell Canada Q3 profit jumps

Wed, October 25, 2006

CALGARY (CP) – Shell Canada Ltd. (TSX:SHC) powered its way to a third-quarter profit of $581 million, up from a year-earlier $457 million, as higher crude oil prices and refining income more than compensated for a slump in natural gas prices.

The Canadian oil and gas major, which received a $7.7-billion buyout offer from parent Royal Dutch Shell PLC (NYSE:RDS) this week, said Wednesday it continues to lay the foundation for more growth in its oilsands and unconventional gas businesses.

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BBC News: Attack on Nigeria oil facilities

A group of protesters have invaded three Shell oil stations in the Niger Delta, forcing the facilities to be shut down, the company said.

The demonstrators are accusing the oil giant of failing to fulfil an agreement to provide them with aid.

Shell refused to say how much oil had been cut off following the attack.

Militant groups have stepped up attacks on oil facilities in the region in recent months, demanding more local control of oil wealth for residents.

Shell said members of the Kula community living near the company’s Ekulama 1, Ekulama 2 and Belema oil pumping stations had invaded the facilities.

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Associated Press: Nigeria villagers seize 3 oil platforms

By DULUE MBACHU, Associated Press Writer
12 minutes ago 

LAGOS, Nigeria – Angry villagers in Nigeria stormed and seized three Shell oil platforms Wednesday in the volatile Niger Delta, forcing oil production to be shut down at each one, a spokesman for the oil company said.

Royal Dutch Shell PLC officials declined to say how much oil had been cut off after the platforms were attacked.

Shell said in statement that members of the Kula community living near Shell’s Ekulama 1, Ekulama 2 and Belema oil pumping stations invaded the facilities Wednesday, accusing the oil giant of failing to meet the terms of an agreement to provide them aid.”We had to shut the facilities,” the statement said, giving no other details.

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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.
 

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