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AFP: Sakhalin dispute risks Russia’s Asian ambitions

Published: Sunday, 24 September, 2006
MOSCOW: Russian government pressure on a Shell-led consortium developing vast oil and gas fields in the Pacific Ocean could set back Moscow’s hopes of becoming a key energy exporter to Asia, observers have said.

The possibility that the dispute could delay planned deliveries from the fields to Asia beyond 2008 is “the understatement of the year”, said Adam Landes, energy expert at the Moscow-based Renaissance Capital investment bank.

“To all extents and purposes the project is paralysed by the decision adopted yesterday. What the investors are facing is re-negotiation or paralysis,” Landes said.
On Monday, Russia revoked an environmental permit for the Sakhalin-2 project, halting work on natural gas infrastructure that is a key part of Moscow’s plans to boost oil and gas exports to energy-hungry Asian markets.

The $20bn project (15.8bn-euro) project is the largest foreign investment in Russia and the world’s biggest privately funded energy venture.

Russian authorities said obtaining a new permit could take six months or more and officials are calling for broader changes to the project’s production sharing agreement (PSA) with the government.

Sakhalin Energy, which is 55% owned by Dutch-British oil giant Shell and 45% by the Japanese firms Mitsui and Mitsubishi, implicitly warned that Russian pressure could damage international links.

“We will continue to work with the Russian authorities to resolve the issue and thereby maintain confidence of international customers in Japan, Korea and North America,” the company said in a statement.

However, revoking the permit “could be damaging for the project and for Russia and lead to delays in project development,” the statement said.

Sakhalin Energy, which is building Russia’s first liquefied natural gas (LNG) plant off the island of Sakhalin in the Russian Far East, has already signed agreements to sell LNG to Japanese energy companies.

Increasing Russian energy links with Asia has been a key goal for President Vladimir Putin. – AFP and its sister non-profit websites,,,,,, and are owned by John Donovan. There is also a Wikipedia feature.

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