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Reuters: UPDATE 1-Russian senators to debate Shell deal on Friday

Thu Oct 19, 2006 9:32am ET 

(Adds confirmation, details)

MOSCOW, Oct 19 (Reuters) – Russia’s upper house of parliament will discuss the Royal Dutch Shell-led (RDSa.L: Quote, Profile, Research) Sakhalin-2 oil and gas project on Friday and will call for government actions over the venture.

Sakhalin-2 has come under pressure over ecological and technical compliance from Russia’s environmental agency. Analysts say this is part of a broader Kremlin strategy to gain control over the lucrative project.

A spokesman for the upper house, the Federation Council, said its natural resources committee had put Sakhalin-2 on Friday’s agenda. He did not say what measures it was proposing.

“Senators will get all the relevant documents tomorrow,” he said, adding that the text of the address to the government was still being prepared.

Russian Resources Minister Yuri Trutnev, who will inspect Sakhalin-2 next week, has said Russia is particularly upset by the doubling of costs at the project to $20 billion, which will delay the moment when the country gets its profit oil from the production sharing deal.

The Sakhalin-2 group, which also includes Japan’s Mitsui (8031.T: Quote, NEWS, Research) and Mitsubishi (8058.T: Quote, NEWS, Research), argues that it is not different from other big projects in the world and its costs rose because of higher steel prices and the weaker dollar.

Russian senators have so far given muted opinions on the project. The deputy head of the resources committee, Vasily Duma, said last week the project’s stability was very important for Russia’s investment climate.

But he also criticised it for the soaring costs and environmental violations. Sakhalin-2 says the ecological violations alleged by the resources ministry were very small and it has put most of them right in less than a month.

© Reuters 2006. All Rights Reserved.

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