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London Evening Standard: Shell at key stage over Sakhalin future

By: Bill Condie, Evening Standard – London: KRTBN
Published: Oct 24, 2006

As BP today unveiled its problems, its great rival Shell was preparing for a crunch meeting with Russia’s Minister for Natural Resources.

Yuri Trutnev will tomorrow fly the length of the Sakhalin project pipeline which is at the centre of threats to the viability of Royal Dutch Shell’s massive gas project in Russia’s far east.

Sakhalin 2 has been delayed after licences were revoked on charges that environmental rules were being disregarded. But sceptics say those claims are trumped up as part of a bid by Moscow to grab a greater share of the project for Russia’s gas giant Gazprom.

Trutnev will fly on a helicopter along the route of the 500-mile pipeline being constructed and visit the remote Siberian settlement of Prigorodnoye, where a massive LNG plant is being built. He will later discuss the issues with ecologists and project operator the Sakhalin Energy company, founded by Shell with a 55 percent stake, and Japanese companies Mitsui and Mitsubishi.

Moscow has been offering mixed messages over the project, with the boss of the state-owned oil company Rosneft saying there will “always be room for international oil companies in Russia”, while the Kremlin has been less conciliatory. That has put Russian President Vladimir Putin on the defensive in the face of bad international publicity over the revocation of the Sakhalin 2 licence.

“We all know that the US Congress has banned the operation of BP in Alaska out of ecological considerations. As for us, we haven’t prohibited anybody from doing anything so far,” Putin said.

But he indicated Moscow’s problems with the project went further than that, saying he was worried about “the possibility costs may double”.

Shell meanwhile is hedging its bets, yesterday unveiling plans to buy out minority shareholders in Shell Canada for GBP3.6 billion, giving it control of its venture mining the oil sand deposits of Alberta.

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