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Posts on ‘October 26th, 2006’

The Guardian: Shell beats forecasts

What the analysts say

Hans Kundnani, business reporter
Thursday October 26, 2006
Guardian Unlimited
 
Royal Dutch Shell today posted better-than-expected underlying profits.

The company yesterday learned it could face prosecution over environmental failures at its massive Sakhalin-2 project in Russia.

Today it announced profits on current cost replacement basis for the third quarter fell 4% from $7.2bn to $6.9bn.

However, this was because the third quarter of 2005’s earnings were boosted by divestment gains of $1.7bn.

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Houston Chronicle: A first: Shell plans to produce at 8,000 feet in Gulf

Oct. 26, 2006, 1:31PM
By BRETT CLANTON
Copyright 2006 Houston Chronicle

Shell said today it will be the first oil company to begin producing oil and natural gas in water that’s 8,000 feet deep, trumping competitors in the Gulf of Mexico who have made discoveries or announced intentions to drill in the region but not started to develop them.

The European oil giant, whose U.S. arm is based in Houston, said it will take the lead on the so-called Perdido project, which it will co-develop with Chevron and BP, and expects to begin tapping three fields near the site “around the turn of the decade.”

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The Moscow Times: Shell Sees Sakhalin-2 in Black by 2013

Moscow Times Sakhalin II

(Ivan Sekretarev / AP
The Shell-run LNG terminal on Sakhalin Island. Shell said it would report on its talks with Gazprom by year’s end.)

Friday, October 27, 2006. Issue 3528. Page 7.
Bloomberg 
Ivan Sekretarev / AP

LONDON — Royal Dutch Shell said Thursday that it expected to recover by 2013 the costs incurred under a production-sharing agreement governing its Sakhalin-2 project.

Shell is in talks with Russian authorities and is still negotiating an asset swap that would bring Gazprom into the venture, chief executive Jeroen van der Veer said in a conference call.

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The Moscow Times: Trutnev Grills Sakhalin-2 Chief on Violations

Thursday, October 26, 2006. Issue 3527. Page 1.
By Miriam Elder
Staff Writer  

YUZHNO-SAKHALINSK — Natural Resources Minister Yury Trutnev on Wednesday publicly clashed with the head of Shell-led Sakhalin Energy and called for a criminal case against the company over at least five environmental violations.

After touring work sites around Sakhalin Island, Trutnev said he had prolonged an audit of the project by four months after seeing the extent of the environmental damage.

He gave Sergei Sai, head of the ministry’s environmental agency, two weeks to hand over a criminal complaint to the Prosecutor General’s Office.

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The Scotsman: Russian threat to Shell over environmental inspections

By: Martin Flanagan
Published: Oct 26, 2006

RUSSIA has prolonged an environmental inspection of Royal Dutch Shell’s dollars 22 billion Sakhalin oil and gas project and may prosecute the scheme, a minister said yesterday.

Yuri Trutnev, Russian’s natural resources minister, told a meeting of environmental inspectors and officials from Sakhalin Energy: “The breaches at Sakhalin-2 fall under five articles of the criminal code.

“This falls under criminal law and we think it’s necessary to apply it. All the relevant documents should be sent to the prosecutor general within two weeks.”

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AFX Europe (Focus): Shell says asset swap talks with Gazprom continue despite Sakhalin woes

Published: Oct 26, 2006

LONDON (AFX) – Royal Dutch Shell PLC and Gazprom are continuing discussions over a possible asset exchange, which includes Sakhalin-2, despite the environmental problems suffered by the controversial 20 bln usd Russian gas project.

The pair last year signed a preliminary agreement giving Gazprom, the Russian gas monopoly, a 25 pct stake in Sakhalin-2.

Shell, in return, will get a 50 pct interest in Gazprom’s Zapolyarnoye field in Siberia, the world’s fifth-largest gas deposit.

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AP Worldstream: Villagers agree to vacate seized Shell oil platforms in Nigeria

By: DULUE MBACHU,
Published: Oct 26, 2006

Angry villagers in Nigeria who took over three Shell oil platforms in the volatile Niger Delta have agreed to end their siege and allow operations to resume, Nigerian and company officials said Thursday. But they were still at the stations by day’s end.

Members of the Kula community living near Royal Dutch Shell PLC’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, Shell said.

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AFX News: Shell reaffirms production goals despite Nigerian outage

10.26.2006
 
LONDON (AFX) – Royal Dutch Shell PLC has reiterated its output targets for 2006 and 2007 despite the production outages in Nigeria after separatist militants launched a series of violent attacks on its facilities in the oil-rich Niger Delta region.

Shell also kept its capital spending guidance of 19 bln usd for 2006, excluding the 3 bln usd already spent for acquisitions. However, it put the 21 bln usd capex plan for 2007 under review because of rising costs.

‘Our guidance for the year of 3.4 mln boepd has been maintained,’ Peter Voser, the chief finance officer, told reporters in a conference call following the group’s third quarter results.

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International Herald Tribune: Kremlin threatens to criminally prosecute Shell within two weeks

Headline: Russia raises pressure on Sakhalin-2 project 
By Andrew E. Kramer The New York Times
 
MOSCOW The Kremlin ratcheted up pressure Wednesday on Royal Dutch Shell’s $22 billion oil and natural gas project on Sakhalin Island when a minister threatened to criminally prosecute employees of the British-Dutch oil company within two weeks.
 
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.
 
In the case of Shell, the company and two Japanese partners are accused of violating Russian environmental law in the construction of the project, called Sakhalin-2.
 
The project consists of two offshore platforms, a pipeline, the world’s largest liquefied natural gas plant and an oil terminal.
 
A Russian state company, Gazprom, wants a 25 percent share of Sakhalin-2.
 
The Russian government also has rejected a cost overrun by Shell, which, according to the terms of the 1993 contract, would cut into the state’s royalties.
 
“The breaches at Sakhalin-2 fall under five articles of the criminal code,” Yuri Trutnev, the minister of natural resources, said after touring a pipeline Wednesday, according to Reuters.
 
“This falls under criminal law and we think it’s necessary to apply it. All the relevant documents should be sent to the prosecutor general within two weeks,” he said.
 
Russian officials had threatened criminal charges earlier this month.
 
Trutnev’s statement, however, suggested an escalation because he is a cabinet member and because he also promised a two-week timeline for criminal cases.
 
Trutnev said the Natural Resources Ministry would calculate the cost of environmental damage from Sakhalin-2 within four months.
 
He added that work on some pipeline sections should be halted immediately and that he would prepare documentation to cancel a water-use permit.
 
Also on Wednesday, President Vladimir Putin denied that environmental laws were being enforced selectively against foreign energy companies. Putin, speaking during an annual televised call-in show, said Russia was balancing the need for economic development against the inevitable environmental damage.
 
Trutnev, whose ministry inspected Sakhalin-2 in August and again in September, had said earlier this month that the second inspection provided grounds to revoke a key environmental permit.
 
He said the permit would “likely” be canceled this week.
 
However, on Wednesday he delayed a decision on that permit by one month to allow for further study.
 
Meanwhile, Shell on Wednesday provided the ministry with its response to the initial inspection in August; the company said 98 percent of the infractions cited had been rectified.
 
“I am pleased that Minister Trutnev has taken the time to visit Sakhalin to see first hand the work in progress,” Ian Craig, chief executive of Sakhalin Energy, said in a statement.
 
A company spokesman, Ivan Chernyakhovsky, said he could not respond to Trutnev’s threats of criminal prosecution.
 
“A lot was said today. We aren’t ready to comment on it all in detail,” Chernyakhovsky said. “We think we have complied with Russian legislation.”
 
Wednesday marked the third anniversary of the arrest of Mikhail Khodorkovsky, then chief executive of Russia’s largest private oil company, Yukos, on tax evasion and fraud charges.
 
Khodorkovsky is serving an eight year sentence in a Siberian penal colony not far from the Chinese border.
 
He is employed in the prison workshop, his attorneys said this week.
 
Yukos, once a concern very much in vogue with Western investors, is now in liquidation proceedings.
 
 MOSCOW The Kremlin ratcheted up pressure Wednesday on Royal Dutch Shell’s $22 billion oil and natural gas project on Sakhalin Island when a minister threatened to criminally prosecute employees of the British-Dutch oil company within two weeks.
 
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.
 
In the case of Shell, the company and two Japanese partners are accused of violating Russian environmental law in the construction of the project, called Sakhalin-2.
 
The project consists of two offshore platforms, a pipeline, the world’s largest liquefied natural gas plant and an oil terminal.
 
A Russian state company, Gazprom, wants a 25 percent share of Sakhalin-2.
 
The Russian government also has rejected a cost overrun by Shell, which, according to the terms of the 1993 contract, would cut into the state’s royalties.
 
“The breaches at Sakhalin-2 fall under five articles of the criminal code,” Yuri Trutnev, the minister of natural resources, said after touring a pipeline Wednesday, according to Reuters.
 
“This falls under criminal law and we think it’s necessary to apply it. All the relevant documents should be sent to the prosecutor general within two weeks,” he said.
 
Russian officials had threatened criminal charges earlier this month.
 
Trutnev’s statement, however, suggested an escalation because he is a cabinet member and because he also promised a two-week timeline for criminal cases.
 
Trutnev said the Natural Resources Ministry would calculate the cost of environmental damage from Sakhalin-2 within four months.
 
He added that work on some pipeline sections should be halted immediately and that he would prepare documentation to cancel a water-use permit.
 
Also on Wednesday, President Vladimir Putin denied that environmental laws were being enforced selectively against foreign energy companies. Putin, speaking during an annual televised call-in show, said Russia was balancing the need for economic development against the inevitable environmental damage.
 
Trutnev, whose ministry inspected Sakhalin-2 in August and again in September, had said earlier this month that the second inspection provided grounds to revoke a key environmental permit.
 
He said the permit would “likely” be canceled this week.
 
However, on Wednesday he delayed a decision on that permit by one month to allow for further study.
 
Meanwhile, Shell on Wednesday provided the ministry with its response to the initial inspection in August; the company said 98 percent of the infractions cited had been rectified.
 
“I am pleased that Minister Trutnev has taken the time to visit Sakhalin to see first hand the work in progress,” Ian Craig, chief executive of Sakhalin Energy, said in a statement.
 
A company spokesman, Ivan Chernyakhovsky, said he could not respond to Trutnev’s threats of criminal prosecution.
 
“A lot was said today. We aren’t ready to comment on it all in detail,” Chernyakhovsky said. “We think we have complied with Russian legislation.”
 
Wednesday marked the third anniversary of the arrest of Mikhail Khodorkovsky, then chief executive of Russia’s largest private oil company, Yukos, on tax evasion and fraud charges.
 
Khodorkovsky is serving an eight year sentence in a Siberian penal colony not far from the Chinese border.
 
He is employed in the prison workshop, his attorneys said this week.
 
Yukos, once a concern very much in vogue with Western investors, is now in liquidation proceedings.
 
Published: October 25, 2006

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Independent Online (Africa): Villagers to leave seized oil platforms

By Dulue Mbachu

Lagos, Nigeria – Angry villagers in Nigeria who took over three Shell oil platforms in the volatile Niger Delta have agreed to end their siege and allow operations to resume, Nigerian and company officials said on Thursday.

Members of the Kula community living near Royal Dutch Shell PLC’s Ekulama 1, Ekulama 2 and Belema oil pumping stations invaded the facilities on Wednesday, accusing the oil giant of failing to meet the terms of an agreement to provide them aid, Shell said.

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regnum.ru: Sakhalin Energy ready to indemnify for the damage caused by Sakhalin 2 project but skeptical of the figures

The operator of the Sakhalin 2 project, the Sakhalin Energy company, is ready to indemnify the ecological damage caused by the project but is skeptical of the figures given during the Oct 25 conference on the ecological safety of the Sakhalin 2 project, reports Sakhalin.info.

If an objective assessment finds out that the damage caused by Sakhalin Energy to the environment is much bigger than the company’s preliminary estimates, we are ready to make all the necessary payments, says Sakhalin Energy CEO Ian Craig and adds that the company doubts that the figures are precise. He says that the company has made no changes to its estimates of late.

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The Wall Street Journal: Shell’s Net Falls 34% as Unrest In Nigeria Offsets Oil-Price Rise

By BENOIT FAUCON
October 26, 2006 3:19 a.m.

LONDON — Royal Dutch Shell PLC said Thursday its third-quarter net earnings declined 34% as continued unrest in Nigeria, higher U.K. taxes and cost pressure more than offset a rise in oil prices.

Shell said net income fell to $5.94 billion, or 93 cents a share, compared with $9.03 billion, or $1.35 per share, in the same period a year earlier. But revenue rose 10% to $84.25 billion from $76.44 billion.

Third-quarter 2005 earnings had included divestment gains of some $1.7 billion related to the divestment of pipeline assets held through Gasunie NV in the Netherlands.

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MosNews: Sakhalin Energy Admits to Environmental Violations in Sakhalin-2 Oil Project

mosnews Sakhalin story

Created: 26.10.2006 11:18 MSK (GMT +3), Updated: 11:18 MSK

Sakhalin Energy, operator of Sakhalin-2 oil and gas project, admitted to damaging the eco-system of Russia’s Sakhalin Island, while the country’s Natural Resources Minister Yuri Trutnev gave environmental watchdog Rosprirodnadzor another month to complete its inquire into alleged violations at Shell-led project.

As MosNews has reported on several occasions, the multi-billion-dollar project, led by Royal Dutch/Shell, has been accused of inflicting large-scale damage on Sakhalin’s ecosystem, including illegal deforestation, the dumping of toxic waste, and soil erosion. The production-sharing agreement behind the project, which allows Shell to comfortably recoup all its expenses before sharing any of its profits with the state, is also hugely unpopular with the Russian government. It became especially unpopular last year when Shell announced that expenditures for the project have been doubled to $22 billion.

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The Times: Russia threatens to prosecute Shell over Sakhalin-2

Sakhalin II

By Tony Halpin, in Moscow
26 October 2006

RUSSIA sharply raised the temperature of its dispute with Shell over the Sakhalin-2 project by threatening criminal prosecutions for environmental damage.

Yuri Trutnev, the Natural Resources Minister, accused the Anglo-Dutch company of breaking at least five Russian laws and warned that it faced the loss of licences to develop the giant oil and gas project.

“This falls under criminal law and we think it’s necessary to apply it,” he said.

A file would be sent to Russia’s prosecutor-general within two weeks. At least one of the violations carried a penalty of up to seven years in prison, he said.

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The Times: Putin on the line

EXTRACT: His KGB background should also make him realistic in assessing Russia’s strengths and weaknesses in dealing with the outside world. There is a tendency to overestimate Russia as an “energy superpower”: it still needs Western technology. This may lie behind Russia’s cavalier dealings with foreign oil companies such as Shell and BP, which it wants to force out of contracts that it dislikes. There are suggestions that Exxon’s new deal with China may prompt a strategic reassessment. But pressure on Shell shows no sign of abating. Mr Putin’s vaunted plain speaking should extend beyond domestic issues to a new realism on foreign policy.

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Daily Telegraph: Russia threatens Shell with criminal inquiry

Sakhalin II

(Workers at the Sakhalin-2 project’s liquefaction gas plant in Prigorodnoye, south of Yuzhno-Sakhalinsk)

By Ambrose Evans-Pritchard Last Updated: 12:34am BST 26/10/2006

Russia has threatened to launch a criminal inquiry into Royal Dutch Shell’s Sakhalin-2 project, alleging breach of ecology laws on the mountainous Pacific island. The heavy-handed approach is widely seen as a ruse to pressure Shell and its Japanese partners to let the Kremlin into the venture. Critics call it as a thinly disguised repeat of the Yukos seizure.

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The Independent (UK): Niger Delta bears brunt after 50 years of oil spills

By Jonathan Brown
Published: 26 October 2006

Up to 1.5 million tons of oil, 50 times the pollution unleashed in the Exxon Valdez tanker disaster, has been spilt in the ecologically precious Niger Delta over the past 50 years, it was revealed yesterday.

A panel of independent experts who travelled to the increasingly tense and lawless region said damage to the fragile mangrove forests over the past 50 years was tantamount to a catastrophic oil spill occurring every 12 months in what is one of the world’s most important ecosystems.

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The Independent (UK): Shell faces criminal charges over Sakhalin

By Andrew Osborn in Moscow
Published: 26 October 2006

The Kremlin has called for managers in a Shell-led consortium developing the Sakhalin-2 oil and gas project in Russia’s far east to face criminal charges for “shamefully” damaging the environment.

The threat of managers being handed prison sentences of up to seven years came as the Natural Resources Ministry announced it was extending its environmental audit of the multi-billion pound project by one month.

Both moves pile pressure on Shell, which holds a 55 per cent stake in Sakhalin-2, to scale back its involvement in the project in favour of the Russian energy giant Gazprom.

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The Guardian (UK): Kremlin warns of charges in Sakhalin gas inquiry

The Guardian – United Kingdom; Oct 26, 2006
MARK MILNER INDUSTRIAL EDITOR

The Russian government has extended its investigation into alleged environmental violations at the $22bn (pounds 11.7bn) Sakhalin oil and gas project by another month, and says it could prosecute over the scheme in which Shell is the leading partner.

“The breaches at Sakhalin-2 fall . . . under criminal law and we think it is necessary to apply it,” Yuri Trutnev , the natural resources minister, said yesterday.

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Daily Mail (London): Merger mania “will sweep oil industry”

Oct 25, 2006
Sam Fleming

BP boss Lord Browne predicted a wave of acquisitions will dramatically reshape the oil industry in the coming years, amid growing speculation he could seek a merger with Royal Dutch Shell.

Unveiling a drop in earnings and disappointing oil output, Browne warned the golden age of sky-high energy prices is giving way to a less favourable environment that could force companies into each others” arms.

He acknowledged that “many people are talking about” BP uniting with its biggest European rival Shell.

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MarketWatch: ROYAL DUTCH SHELL – Q3 results presentation

Last Update: 2:33 AM ET Oct 26, 2006

LONDON, UK, Oct 26, 2006 (MARKET WIRE via COMTEX) — Live media presentation at 1100BST followed by analyst and investor presentation at 1315BST on www.cantos.com with Jeroen van der Veer, CEO and Peter Voser, CFO.
 
It’s free to view. All you need to do is register at www.cantos.com Cantos.com is an online financial website where top management of companies address the critical issues facing their businesses. If you would like to contact us, please email [email protected].

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Financial Times: Probe into Shell’s Sakhalin-2 is extended

By Arkady Ostrovskyin Moscow: Published: October 26 2006 03:00 | Last updated: October 26 2006 03:00

The Russian government has extended its environmental probe into Sakhalin-2, the huge oil and gas development project, by another month.

At the same time, it increased pressure on the Royal Dutch Shell-led $22bn (£11.7bn) project by threatening to bring criminal charges for damaging the country’s forests.

Yuri Trutnev, Russia’s minister for natural resources, flew to Sakhalin yesterday and said “the breaches at Sakhalin-2 fall under five articles of thecriminal code”.

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The Times: BP and Shell are defined by differences

By James Harding
BUSINESS EDITOR’S COMMENTARY
The Times October 26, 2006

UNFORTUNATELY for Lord Browne, his final two years at BP — assuming he stays that long — look set to be haunted by a classic species of story: you know that thing you never heard of, well, it’s not happening.

During the wrangle over Lord Browne’s retirement this summer, it emerged that the BP chief executive had explored the idea of one last mega-deal, namely a merger with Royal Dutch Shell. It was never clear whether it was a possibility that Lord Browne diligently explored or simply mulled for the duration of one cigar. Either way, his chairman, Peter Sutherland, was said to have quashed it.
 
BP is bedevilled by political problems, inside the company and out. But the Shell issue is a diversion. Lord Browne is being wilfully misconstrued in the light of the deal that never was.

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Royal Dutch Shell plc: 3rd Quarter Unaudited Results (*Shell prepared to pay $500 million to settle class action)

Thursday October 26, 2:00 am ET 
Delivery and Growth – Leveraging a Strong Portfolio

LONDON, October 26 /PRNewswire-FirstCall/ —
Royal Dutch Shell’s third quarter 2006 CCS earnings were $6.9 billion, compared to some $7.2 billion a year ago. CCS earnings per share increased by 1% versus a year ago. Third quarter 2005 earnings included divestment gains of some $1.7 billion related to the divestment of pipeline assets held through Gasunie NV in the Netherlands.

– Excluding the 2005 divestment gain of $1.7 billion related to Gasunie, CCS earnings per share increased by 33% versus a year ago.

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Reuters: Western agrees to Shell Canada oil sands expansion

Wed Oct 25, 2006 10:12 PM EDT
 
CALGARY. Alberta (Reuters) – Western Oil Sands Inc. (WTO.TO: Quote) said on Wednesday it has formally agreed to participate in Shell Canada Ltd.’s (SHC.TO: Quote) planned expansion of its Athabasca oil sands project at an expected cost to the company of C$2.2 billion ($1.95 billion).

Calgary-based Western Oil Sands’ main asset is its 20 percent stake in the project, which is slated for a 100,000 barrel a day expansion.

Western said the expansion is likely to cost about C$11.2 billion. In July, Shell Canada pegged the price of the project at anywhere between C$10 billion and C$12.8 billion.

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The Wall Street Journal: Not So Big Oil

October 26, 2006; Page A18

Our favorite headline this week has to be “Big Worries for Big Oil,” reporting that oil company profits are under pressure as oil prices decline. Exxon Mobil, Royal Dutch Shell, BP and other members of the vast energy conspiracy may have a hard time keeping their run of profit growth going now that oil prices have fallen to $60 or so a barrel from upwards of $80.

Imagine that: Oil companies are subject to market forces. They may make big profits when the price of oil rises, but those profits invariably fall back down to Earth when oil prices decline. This is also what happened in the 1990s, as oil crashed below $20 a barrel after the heights reached in the 1970s. The companies and their shareholders swallowed those declines, as they should have.

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The Wall Street Journal: Russia Delays Sanctions On Shell’s Energy Project

By GREGORY L. WHITE in Moscow and GREG WALTERS in Yuzhno-Sakhalinsk, Russia
October 26, 2006; Page A13

Russian regulators put off imposing sanctions on Royal Dutch Shell PLC’s $20 billion Sakhalin-2 project for what they say are widespread environmental violations, keeping the pressure on as the Kremlin steps up complaints about massive cost overruns at the venture.

After an inspection tour of the project on the far eastern island of Sakhalin, Russian Natural Resources Minister Yuri Trutnev cited “multiple violations” of Russian environmental laws at a meeting with Shell officials.

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