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The Guardian: Shell’s environmental efforts fail to quell Russian threat

Terry Macalister
Tuesday October 17, 2006

The Russian government tightened the pressure on Shell over the Sakhalin-2 gas project by warning that failure to sort out environmental problems would lead to “absolutely any sanctions”.

The tough stance from the resources minister, Yuri Trutnev, came even though Shell’s chief executive, Jeroen van der Veer, said his company had already sorted out the bulk of the problems.

The Sakhalin-2 scheme, the world’s biggest liquefied natural gas project, has been dogged by ecological difficulties and soaring financial costs.

Mr Trutnev said Shell had nothing to fear for the future of the £11bn scheme if it produced an “exhaustive” plan to deal with the damage inflicted on the local area. But he warned: “If such measures are not proposed then absolutely any sanctions are possible from our side.”

Industry experts have long questioned whether the Russian government is trying to force Shell off the Sakhalin scheme. The Kremlin is angry about the doubling of costs which will delay its tax revenues under the production-sharing agreement Shell tied up a decade ago.

Mr van der Veer told the foreign investment advisory council chaired by the prime minister, Mikhail Fradkov, that Shell had answered Russia’s environmental concerns.

“Although the project has faced significant environmental challenges, we firmly believe these have been fully and transparently addressed,” he said. “We are confident that all remaining issues can be resolved through our ongoing, constructive and fair dialogue with the Russian government.”,,1923931,00.html

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