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Financial Times: SAKHALIN 2 AWAITS ENVIRONMENTAL STUDY

By Arkady Ostrovsky
Published: September 27 2006 03:00 | Last updated: September 27 2006 03:00

Yuri Trutnev, Russia’s minister for natural resources, yesterday said Moscow would not take any decision on whether to stop the Shell-led Sakhalin 2 project until a month-long environmental study had been completed, Arkady Ostrovsky writes from Moscow.

“Until the end of the probe, the expert opinion won’t be cancelled. If it is cancelled, further work becomes illegal,” Mr Trutnev said.

However, he said even without conducting the fresh probe, his ministry was convinced that Sakhalin Energy, the operator of the project in which Shell has the biggest stake, had violated its environmental permit. “The violations are there and they are more than significant. We do not need to do anything [extra] to convince ourselves. The probe is needed to convince you [the journalists and the public].”

Mr Trutnev said the investigation would show whether the environmental situation could he rectified without stopping the project, a move that would cost all partners and the Russian government billions of dollars. “We will do everything in our power not to stop the project,” he said. “But everything depends on the company.”

Observers said this was part of the negotiations between Russia and Shell, which says the project’s costs have doubled to $20bn (€15.7bn, £10.5bn), which would have a knock-on effect on Russia’s profits under a production sharing agreement.

A spokesman for Sakhalin Energy urged Russia to treat the issues of environmental compliance and economic costs separately.

Copyright The Financial Times Limited 2006

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