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Dow Jones Newswires: Updated: Royal Dutch Shell Plc Sakhalin-2 Permit May be Pulled This Week-2

Russia’s Minister of Natural Resources, Yuri Trutnev, said last week that enhanced environmental scrutiny of Sakhalin Energy is part of Russia’s efforts “to defend its interests” after Shell announced that the cost of the project would nearly double to $20 billion.

The project is being developed through a special deal approved by Parliament known as a production-sharing agreement under which, in lieu of taxes, Russia takes part of the oil and gas produced once the investors’ costs are covered. Doubling the cost of the project would mean Russia would have to wait longer to see its share of the profits.

Mitvol said his agency also expects a Russian court to hear a suit this week, brought by Rosprirodnadzor, which is aimed at canceling the permit. But Mitvol said the Ministry doesn’t need a court decision to withdraw its approval.

“I think that by Friday we will succeed in canceling the permit,” Mitvol said.
The General Prosecutor’s office said in a statement issued Saturday that “this legal document was drawn up in violation of current legislative requirements and is subject to being annulled.”

Sakhalin Energy is also producing 80,000 barrels of oil a day under Phase-1 of the project. Sakhalin Energy has said that pulling environmental approval for Phase-2 wouldn’t halt oil production under Phase-1, although Russian officials have said they may also shutter Phase-1 over separate considerations.

-By Greg Walters and Benoit Faucon, Dow Jones Newswires (+7 495) 974 8055; [email protected]

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