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The Scotsman: Shell faces environmental battle over Sakhalin-2

By: Martin Flanagan City Editor, The Scotsman – United Kingdom
Published: Oct 17, 2006

RUSSIA threatened the oil giant Shell with “absolutely any sanctions” as the row about alleged environmental violations at its Sakhalin-2 project rumbled on yesterday.

The hardening of the Russian stance came as Shell chief executive Jeroen van der Veer said all the problems had been fully addressed.

Yuri Trutnev, Russia’s resources minister, said the British/Dutch oil major had no reason to fear for the future of the vast oil and gas project if it tackled the many environmental concerns raised by the country’s officials.

Trutnev said: “If the company presents an exhaustive plan to remove environmental damage … then it is completely obvious that there will be no point in stopping the project.”

But Trutnev added: “If such measures are not proposed, then absolutely any sanctions are possible from our side.”

Shell is developing fields off the coast of the Pacific island of Sakhalin and building one of the world’s largest liquefied natural gas plants. The project is due to start supplying Asian and US customers from mid-2008.

Sakhalin-2 has come under pressure from the Kremlin over ecological and technical issues which analysts say are part of a broader Kremlin campaign to limit foreign involvement in the strategic energy sector.

Jeroen van der Veer told the foreign investment advisory council, chaired by Russia’s prime minister Mikhail Fradkov, that Shell had answered Russia’s ecological concerns. Van der Veer said: “Although the project has faced significant environmental challenges, we firmly believe these have been fully and transparently addressed.”

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