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St Petersburg Times: Shelling Out For the Environment

Issue #1208(74), Friday, September 29, 2006

Bloomberg: YUZHNO-SAKHALINSK — Royal Dutch Shell Plc’s Sakhalin-2 oil and gas project should stop building pipelines and resolve the environmental damage it has caused, said Oleg Mitvol, deputy head of Russia’s environmental inspectorate.”We will do everything to make the company stop work and pay for the environmental damage,” Mitvol, sitting at a table flanked by local and international environmentalists, said Thursday in Yuzhno-Sakhalinsk, the capital of Sakhalin Island. Mitvol yesterday said his inspectorate may assess that damage at more than $50 billion.

Shell and Japan, developers of the Sakhalin-2 fields in the Sea of Okhotsk, yesterday rebuked Russia for threatening to halt the project, citing “abnormal” and “one-sided” demands.

Shell, BP Plc, Exxon Mobil Corp., and Total SA face demands from Russia to cede some control of oil and gas fields to state-aligned companies, OAO Gazprom and OAO Rosneft. The foreign-led ventures have become anomalies in Russia as President Vladimir Putin increases state control over the energy industry.

The Natural Resources Ministry will take “very detailed aerial photographs” of the pipelines and study them, before turning them over to the Prosecutor General’s Office, said Mitvol, whose inspectorate is part of the resources ministry. The venture may be liable for prosecution, Mitvol said.

Sakhalin Energy Investment Co., the project operator, refused to let Mitvol inspect the pipelines today, Mitvol said. The venture also declined to attend a meeting set up today with environmental inspectorate officials, journalists and local and international environmentalists, Mitvol said.

Mitvol’s visit was delayed because of safety concerns connected to the number of people that the official wanted to bring with him, Ivan Chernyakhovsky, a Sakhalin Energy spokesman, said Thursday in a phone interview from Sakhalin.

The U.K.-based International Fund for Animal Welfare was sceptical regarding Mitvol’s assessment of the possible damages. “$50 billion is an unrealistic figure, especially considering that the standard fines for damaging the environment are so low in Russia,” said Masha Vorontsova, the head of the fund for Russia.

According to Clare Sterling, a spokeswoman for the fund, “the environmental message is clear. Whoever ends up running the project needs to be aware of its environmental impact,” Sterling said in an interview on Sakhalin Island.

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