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AFP: Russia’s Sakhalin energy project safe for now: official

MOSCOW (AFP) – Russia is not considering freezing the giant Sakhalin-2 oil and gas project, a key official said, easing fears that the world’s largest privately funded energy project could be closed down for environmental violations.

“The question of freezing the project is not being posed at the moment. Russia will respect and fulfil its international obligations, in particular with respect to foreign companies,” said Oleg Mitvol, deputy head of Russia’s ecological monitoring agency.

“The final evaluation of ecological damage will not be made before the end of the summer 2007,” Mitvol said in comments broadcast on Russia’s Channel 1 television station.

In mid September Russia’s natural resources ministry moved to revoke environmental authorisation for the 20-billion-dollar (15.8-billion-euro) project carried out by British-Dutch oil giant Shell and Japanese firms Mitsui and Co and Mitsubishi Corp, sparking a chorus of international protest.

Mitvol, who has spearheaded the environmental crackdown on Sakhalin, was quoted during a visit to the island in late September as saying that “the project must be stopped.”

While environmental groups have heavily criticized the project for alleged breaches, energy analysts said environmental concerns were a pretext for behind-the-scenes manoeuvring to give Russian state-backed energy companies a greater stake in projects dominated by foreign firms.

Executives from Sakhalin Energy, in which Shell holds 55 percent and Matsui and Mitsubishi own the rest, have said that any closure would cause massive financial losses and dent Russia’s reputation as an energy supplier.

The Sakhalin 2 project includes the construction of an 800-kilometer (500-mile) gas pipeline that runs the length of the island, a liquefied natural gas plant, two oil platforms and an oil terminal.

Sakhalin-2 is committed to delivering its first shipments of liquefied natural gas to Japan in 2008.

Sat Oct 14, 5:27 PM ET

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