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The Moscow Times: Eni Faces Probe Over Sakhalin-2

Friday, October 6, 2006. Issue 3513. Page 5.
By Dmitry Zhdannikov
Reuters

The Natural Resources Ministry’s environmental regulator said Thursday that it would probe a company controlled by Italian energy group Eni working as a contractor on the Sakhalin-2 oil and gas project led by Royal Dutch Shell.

It made the announcement a day after Eni CEO Paolo Scaroni said rising pressure on Western energy companies in Russia had delayed an asset swap deal between Eni and Gazprom.

On Thursday, Scaroni backtracked.

“It’s going well,” Scaroni said when asked about the talks.

“It’s a very complex negotiation and we have fixed a date of Oct. 15. … I am planning to go to Moscow by that date if we have reached a sufficient level of confidence in the possibility of signing an agreement,” Scaroni said on the margins of a Berlin energy conference.

Scaroni declined to comment on a report in Italy’s Finanza e Mercati business newspaper that Eni was unwilling to turn over control of its Gas & Power unit to Gazprom without a corresponding stake in Gazprom.

The environmental agency, the Federal Service for the Inspection of Natural Resources Use, said in a statement it had submitted documents about illegal deforestation by the contractor to prosecutors. It has previously threatened to open multiple probes against many contractors, without giving their names.
 
On Thursday, the agency specifically underlined that one of the contractors was Starstroi, which it said was a subsidiary of Eni. Starstroi is in fact a subsidiary of oil field services firm Saipem, which is controlled by Eni.

Eni and Gazprom are planning to swap assets. The aim is to give Gazprom direct access to gas distribution in Italy, while Eni is eyeing access to Russian oil and gas reserves. Talks have progressed slowly over the past year as industry sources say neither side is happy with the assets on offer.

Scaroni, in his comments about rising pressure on Western oil firms, was directly referring to Sakhalin, which has faced troubles since last year, when Shell announced that it would double costs at the project to $20 billion. The move infuriated Gazprom, which was hoping to swap a stake in its Zapolyarnoye field in Western Siberia against 25 percent in Sakhalin-2. The Sakhalin-2 project envisages the export of liquefied natural gas, or LNG, to Japan and the United States.

The Federal Service for the Inspection of Natural Resources Use has threatened to halt the project and withdraw its ecological permits, although the Shell-led group says it is still on track to ship the first LNG in 2008.

Many analysts have interpreted the rising pressure as a Kremlin strategy to squeeze foreigners out of the energy sector or force them to cede bigger stakes to state-run companies on better terms.

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