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Bloomberg: Dutch Foreign Ministry Asks Russia to Explain Sakhalin Decision

By Fred Pals

Sept. 20 (Bloomberg) — The Dutch Foreign Ministry wants an explanation from the Russian government for the cancellation of Royal Dutch Shell Plc’s permit for the $20 billion Sakhalin-2 oil and gas project.

Russia’s industrial safety inspectorate is expected to authorize by tomorrow a Natural Resources Ministry order canceling a key Sakhalin-2 operating permit on environmental damage grounds. The move underscores Russian President Vladimir Putin’s tightening grip on the nation’s energy industry.

“We want to know what are the reasons for the apparent cancellation,” Gijs Gerlag, a Foreign Ministry spokesman for European affairs, said by phone today from The Hague. “The stakes are high with this project,” he said. Dutch Foreign Minister Ben Bot will contact his Russian counterpart, Sergey Lavrov, as soon as possible, Gerlag added.

Shell, based in The Hague, owns 55 percent of the Sakhalin-2 project, the largest foreign investment in Russia. The other 45 percent is owned by Mitsubishi Corp. and Mitsui & Co., Japan’s two biggest trading companies.

Shell’s Sakhalin-2 venture has failed to resolve half of its 60 environmental breaches, Alexander Losyukov, Russia’s ambassador to Japan told reporters in Tokyo today. Still, Russia’s government won’t cancel the project as the facility is “vital” for the country’s oil and gas exports for the next 15 years, he said.

To contact the reporter on this story: Fred Pals in Amsterdam at [email protected]

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