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Reuters: Russia tells Dutch will start talks with Shell soon

Wed Oct 4, 2006 2:09pm ET

AMSTERDAM, Oct 4 (Reuters) – Two Russian ministries assured Dutch Economy Minister Joop Wijn on Wednesday that Moscow will soon start talks with Shell (RDSa.L: Quote, Profile, Research) to try to resolve the crisis over the Sakhalin-2 project, Wijn’s spokesman said.

Russian Deputy Energy Minister Andrei Reus and Economy Minister German Gref told visiting counterpart Wijn that Russia wanted to solve disagreements with Shell over the project’s costs and environmental impact, Wijn’s spokesman Job Frieszo said.

“Minister Wijn expressed the deep concern of the Dutch government once again,” he told Reuters by phone from Moscow.

“They assured us that Russia will abide by international rules but said that there are differences between the Russian government and Shell in the interpretation of the costs of the project and the environmental impact.”

“They promised to start talks with Shell very soon. They will try to solve the matter urgently,” Frieszo said.

Top executives from Shell and its Sakhalin partners Mitsui & Co. (8031.T: Quote, NEWS, Research) and Mitsubishi Corp. (8058.T: Quote, NEWS, Research) are due to meet this week to discuss Moscow’s withdrawal of environmental approvals for their drilling and protests against over spending on the $20 billion project.

Russian officials have accused the venture of major environmental breaches, but analysts and diplomats say these may be a pretext for the Kremlin to force Shell and its partners to renegotiate the deal on less favourable terms.

Russia has said Sakhalin-2 will not be stopped without a full environmental probe, but the move has clouded the project’s future and alarmed foreign investors, as well as energy-deficient European countries who depend on Russian natural gas imports during the winter.

Russia’s pressure on the project consortium dismayed Japan, which needs the gas from Sakhalin, and have drawn protests from Brussels, London and The Hague.

Two weeks ago, Dutch Prime Minister Jan Peter Balkenende phoned President Vladimir Putin to seek an explanation for Russia’s tough line on Sakhalin.

The Anglo-Dutch energy giant angered Moscow a year ago by admitting the project would cost $20 billion, twice as much as it originally estimated, complicating talks on a strategic swap of assets with Russia’s gas monopoly Gazprom (GAZP.MM: Quote, Profile, Research).

State-controlled gas monopoly Gazprom is in talks with Shell to take a 25 percent stake in Sakhalin-2, in which Shell now holds 55 percent, Mitsui 25 percent and Mitsubishi 20 percent.

© Reuters 2006. All Rights Reserved.

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