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MarketWatch: Sakhalin Energy confident permit issues will be resolved quickly

YUZHNO-SAKHALINSK, Russia (MarketWatch) — Sakhalin Energy’s chief executive said Wednesday he was confident his company would resolve a conflict over alleged environmental violations soon.

“I do believe these issues will be resolved very quickly with the ministry” said Ian Craig, referring to Russia’s Ministry of National Resources.

Russian authorities had threatened to pull a key environmental permit for the company, a move Sakhalin Energy said Tuesday could create an additional $10 billion in costs for the project.

Craig noted that the ministry had “robustly defended” the validity of the permit in a separate court case as recently as August. He also admitted, however, that the work of unnamed subcontractors at the project had been “unsatisfactory.”

Russian authorities have accused Sakhalin Energy’s pipeline subcontractors of causing unnecessary erosion and environmental damage.

But Craig insisted that the current debate over Sakhalin Energy’s environmental permit was not due to shortcomings in the company’s work.

Many analysts believe that the Kremlin is increasing pressure on the project as a way to improve the terms of the deal for Russia.

Sakhalin-2, an offshore oil and natural gas development project in the northeastern area of Russia’s Sakhalin Island, is operated by international consortium Sakhalin Energy, in which Royal Dutch Shell PLC (RDSB.LN) has a 55% stake. A Mitsui & Co. (8031.TO) unit holds a 25% stake, and Diamond Gas Sakhalin, a Mitsubishi Corp. (8058.TO) unit, holds a 20% stake in the consortium.

-Edited by Jay Alabaster
-Contact: 201-938-5400 

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