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RIA Novosti: Sakhalin II changes depend on corporate interests – minister

21:10 | 17/ 10/ 2006 

MOSCOW, October 17 (RIA Novosti) – Changes in the composition of the participants in the controversial Sakhalin II oil and gas project in Russia’s Far East are dictated purely by corporate interests, Russia’s industry and energy minister said Tuesday.

Oil major Royal Dutch Shell, which is leading the vast hydrocarbon project, said earlier that negotiations with Gazprom on the Russian energy giant’s participation in the project were going well.

The negotiations follow the Natural Resources Ministry’s move to annul a key permit for the project in September, which leading environmental groups had been campaigning against for years over large-scale destruction to the island’s ecology.

Viktor Khristenko said, “Internal participant changes are continually taking place in projects implemented in line with the product sharing agreement. They are dictated by corporate interests and nothing else.”

Under a previous deal, Gazprom was to provide a stake in a gas field in exchange for a share in Sakhalin-II. However, Shell announced in 2005 that the cost of the project’s development would be more than doubled, a move that complicated the terms of the asset swap.

The Sakhalin-II project comprises an oil field with associated gas, a natural gas field with associated condensate production, pipeline, a liquefied natural gas plant and an LNG export terminal. The total reserves of the two fields are 150 million metric tons of oil and 500 billion cubic meters of natural gas.

Russia’s environmental watchdog, the Federal Service for the Oversight of Natural Resources, began an inspection of Shell-controlled project operator Sakhalin Energy’s alleged violations of ecological legislation and project specifications July 25.

The watchdog said earlier its experts found the company had failed to build anti-erosion facilities and registered excessive disposal of industrial wastewater from the Molikpaq offshore production platform.

The service said it was taking legal action to enforce the Natural Resources Ministry’s annulment of an ecological permit issued in 2003.

But some analysts interpreted the environmental watchdog’s decision to be a form of pressure on the Anglo-Dutch oil major to conclude a deal with Gazprom, which seeks a 25+1% share in the Sakhalin project in return for a 50% stake in the massive West Siberian Zapolyarnoye-Neocomian project.

Shell announced last July that it signed a memorandum of understanding with Gazprom on the swap, which it said then was “strategically important to both parties.”

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