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RIA Novosti: Operator, govt. to draw joint plan to undo Sakhalin II eco-damage

15:30 | 25/ 10/ 2006   
 
YUZHNO-SAKHALINSK, October 25 (RIA Novosti) – Russia’s natural resources minister and the company operating the vast Sakhalin II energy project in the country’s Far East agreed Wednesday to draw up a joint action plan to repair the environmental damage it has caused.

Sakhalin Energy CEO Ian Craig, who has admitted that his Shell-controlled company committed grave violations in developing the project, told reporters following a face-to-face meeting with Yury Trutnev that the two of them have agreed to work in close cooperation to repair the damage inflicted on the country’s largest island, off the Pacific coast.

The multi-billion dollar project has been accused of inflicting large-scale damage on Sakhalin’s eco-system, including illegal deforestation, dumping of toxic waste, and soil erosion.

Craig said Sakhalin Energy, which last year doubled the project’s costs to $22 billion, will be willing to compensate for the damage, but expressed doubt that the ministry’s preliminary estimate of 10 billion rubles ($371.33 million) is accurate.

Earlier Wednesday, Dmitry Belanovich, acting as the regional head of the Rosprirodnadzor environmental watchdog, said agency inspectors will need another month to gauge the damage caused to the Aniva Gulf ecosystem, in the Sea of Okhotsk, by a plant built under the Sakhalin II project to liquefy natural gas.

The project will bring an estimated $50 billion into Russia’s treasury if oil trades at $35 per barrel, and as much as $80 billion if the price is $50 per barrel, the operator said in a press release, adding that Sakhalin II will remain economically viable despite the revised costs.

The production-sharing agreement behind the Sakhalin II project allows Shell to recoup all its expenses before sharing any of its profits with the state. By deciding to double the project’s cost to $22 billion, the company put off the date by which the Russian government will receive its share of the profits.

Royal Dutch Shell holds a controlling 55% stake in Sakhalin Energy, while Japan’s Mitsui and Mitsubishi own 25% and 20%, respectively.

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