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The Russia Journal: Battle continues over Sakhalin-2

September 29, 2006

YUZHNO-SAKHALINSK – Using oil pipelines within the framework of the Sakhalin-2 project could lead to an environmental disaster, Oleg Mitvol, Deputy Director of Russia’s Federal Service for Environmental Supervision (Rosprirodnadzor), said on Thursday after inspecting the construction of gas and oil pipelines near the Sovetskoye village. He said Rosprirodnadzor would send the results of its examination to the Prosecutor’s Office. He did not elaborate on the nature of the possible damage.

Mitvol said this area was characterized by high seismic activity, and mudslides were possible, which could cause oil spills and contaminate the sea. “It is unclear why the operator did not point to these risks in its technical and economic study. Unfortunately, the predictions of environmentalists came true, and what we see now looks much worse than it was in pictures,” Mitvol stressed.

He said Sakhalin-2 operator Sakhalin Energy had been aware of the problems since February 2006, but it has not reported them to controlling agencies. It was only in June 2006 that Rosprirodnadzor began to receive detailed reports, Mitvol said.

Environmental violations are not punished with license withdrawal, according to Mitvol. “But the operator in fact prevents the inspection. In any other country a company which does not allow inspectors to do their job, will not go unpunished,” he said.

Sakhalin-2 envisages the development of the Lunskoye and Piltun-Astokhskoye fields with total reserves of 600 million tonnes of oil and condensate and 700 billion cubic meters of natural gas. The operator of the project is Sakhalin Energy, in which Shell Sakhalin Holdings B.V. (controlled by Royal Dutch/Shell) has 55 percent, Mitsui Sakhalin Holdings B.V. (founded by Mitsui) has 25 percent, and Diamond Gas Sakhalin B.V. (controlled by Mitsubishi Corporation) has 20 percent.

The second stage of the project was announced in May 2003. Along with the construction of offshore platforms in Aniva Bay (southern Sakhalin), the second phase of Sakhalin-2 includes the construction of an oil terminal and a LNG plant with a capacity of 9.6 million tonnes, estimated at $2 billion.

On 19 September, Russian Natural Resources Minister Yuri Trurnev signed a decree withdrawing the approval of an environmental study on the second phase of Sakhalin-2. To take effect, this document needs to be approved by the Federal Environmental, Engineering and Nuclear Supervision Agency (Rostekhnadzor). The Prosecutor General’s Office insists that the Russian Natural Resources’ decree is in violation of the Russian law.

On 26 September Rosprirodnadzor launched the comprehensive examination of Sakhalin-2, which will continue until 25 October. After that the environmental service will announce its estimate of the environmental damage. The Natural Resources Ministry said it would not allow the implementation of Sakhalin-2 unless Sakhalin Energy ensures environmental safety.

Environmental damage from Sakhalin-2 project could top $50 billion, Mitvol told reporters on Wednesday, commenting on remarks by Sakhalin Energy Vice President Igor Ignatyev who said his company could suffer direct losses of $10 billion if the project was blocked by the Russian authorities.

Source: RBC. 

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