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The Wall Street Journal: Shell Addresses Ecological Issues Over Sakhalin II

A WALL STREET JOURNAL NEWS ROUNDUP
October 16, 2006 2:04 p.m.

The head of Royal Dutch Shell PLC said the oil producer had addressed Russia’s environmental concerns at its troubled $20 billion liquefied-natural-gas project on the Far Eastern island of Sakhalin.

The case, which saw Russian regulators freeze a key environmental permit in September, has rattled investors who suspect the charges are being used to pressure the company to reshape the original 1990s deal to the Kremlin’s benefit.

“This project has faced significant environmental challenges,” Shell Chief Executive Jeroen van der Veer said. “We firmly believe that these have been fully and transparently addressed.” Russian Natural Resources Minister Yuri Trutnev has given the Shell-led consortium until the end of the month to make proposals to rectify the alleged violations.

Mr. Trutnev said Monday that if the company’s plan is acceptable, the development won’t be stopped and noted that he had received assurances from Mr. van der Veer the company was working to resolve the problems. Mr. Trutnev praised Shell for taking a more constructive approach to Russia’s environmental concerns. “My meeting today with Van der Veer represents a 180-degree about-turn,” Mr. Trutnev said. “He talked about existing violations, about ecological standards and how they have already started improving the situation.”

A spokesman for the ministry said no formal plan from Shell had yet been received, and Mr. Trutnev noted that “absolutely any sanctions” are possible if the proposals prove unsatisfactory.

Shell’s Sakhalin II project is one of a handful of major field developments signed in the 1990s to come under closer environmental scrutiny. The natural-resources ministry has also been reviewing the licenses of Russian companies. On Friday, it said it had given No. 1 producer OAO Lukoil as long as six months to resolve violations under 20 of its licenses. Monday, the ministry said it had requested information on 398 licenses held by Lukoil.

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