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The Wall Street Journal: Russia Doesn’t Plan to Scrap Shell’s Oil-and-Gas Venture

A WALL STREET JOURNAL NEWS ROUNDUP
September 28, 2006

Russia’s foreign minister said the Kremlin didn’t want to scrap the contract for a $20 billion Royal Dutch Shell PLC oil-and-gas venture and wasn’t seeking to push foreigners out of its energy sector.

But as Sergei Lavrov sought to soothe fears over the energy projects, Russia’s environmental watchdog issued another harsh statement, saying Shell’s project might have caused ecological damage of $50 billion. Sakhalin Energy — the consortium led by Shell — has suggested environmental groups are exaggerating the extent of the damage, and insists it is keeping to ecological-safety standards.

President Vladimir Putin, who has refrained so far from any direct comment on the project, which will ultimately supply customers in Japan and the U.S., urged the government to take measures against firms breaching license agreements.

Shell angered Moscow a year ago by doubling the estimated costs of its Sakhalin II oil-and-gas project, delivering a $10 billion bill, which, under Shell’s production-sharing agreement, is likely to land on the Kremlin’s doormat.

“Assertions about ‘revisions’ of [production-sharing agreements], and especially about squeezing foreigners out of the Russian energy sector, have absolutely no basis whatsoever,” the foreign ministry quoted Mr. Lavrov as telling a conference on Sakhalin, the Pacific island where the project is based. “Carrying out checks in no way means that licenses for developing deposits within the Sakhalin II project will be withdrawn.”

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