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The Houston Chronicle: Russian Auditors Query Shell Gas Project

By ALEX NICHOLSON AP Business Writer
© 2006 The Associated Press
26 September 2006

MOSCOW — Russian authorities will try to avoid shutting down a Shell-led liquefied gas project off the eastern island of Sakhalin, the natural resources minister said Tuesday. But the minister, Yuri Trutnev, warned that the project was riddled with serious environmental violations.

A final decision on whether to withdraw a key license at the Sakhalin-2 project will be made by the ministry within a month after experts from a state environmental safety watchdog complete an audit, Trutnev said. The auditors headed to the region Tuesday.

“We must to everything possible to resolve this situation without stopping the project,” Trutnev said at a news conference.

Trutnev’s ministry said last week that it would revoke the permit at Sakhalin-2, which is being developed by Sakhlain Energy, a consortium led by Royal Dutch Shell PLC.

Plans to revoke its environmental permit would freeze work for 17 months and cost 15,000 jobs, said Igor Ignatyev, Sakhalin Energy’s vice president for corporate affairs.

“If it is signed, it will have irreversible effects,” Ignatyev said on Ekho Moskvy radio. “I have the sense that the people who take these steps don’t know what the legal consequences of this might be.”

Analysts have suggested the ministry’s move is a bargaining tool aimed at securing more favorable conditions for state gas monopoly Gazprom, which is in negotiations to join the project.

Ignatyev did not comment directly on that issue, but said “there are a lot of coincidences.”

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