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The Guardian (UK): Kremlin warns of charges in Sakhalin gas inquiry

The Guardian – United Kingdom; Oct 26, 2006

The Russian government has extended its investigation into alleged environmental violations at the $22bn (pounds 11.7bn) Sakhalin oil and gas project by another month, and says it could prosecute over the scheme in which Shell is the leading partner.

“The breaches at Sakhalin-2 fall . . . under criminal law and we think it is necessary to apply it,” Yuri Trutnev , the natural resources minister, said yesterday.

Sakhalin Energy, which is responsible for the scheme, the world’s biggest liquefied natural gas project, said it was deter mined to resolve all the issues raised by the latest environmental inspection and to ensure that that the transparency and accountability demonstrated by Sakhalin-2 “can be seen as a benchmark for future energy developments in Russia”.

The latest exchanges came on the eve of today’s announcement of Shell’s third quarter figures. The City is expecting the company to unveil profits on a current cost replacement basis of about $5.7bn.

Although Russia’s criticisms of the Sakhalin project, which is still under construction, have focused on environmental issues, some analysts believe that the pressure is part of a campaign by the Kremlin to claw back more control over it.

Under an agreement between Russia, Shell and its partners, Mitsubishi Corp and Mitsui, the bulk of the revenues from the field will go to the developers until they have covered their capital costs. Russia is said to have been infuriated when it was announced that the costs of developing the project had doubled.

There have also been suggestions that official pressure could be designed to strengthen the hand of the state-owned gas group, Gazprom, which has been negotiating with Shell over a deal that would see the Russian company acquire 25% plus one share in Sakhalin-2.

Both Japan, which will take the bulk of the gas produced at Sakhalin-2, and the European Union have expressed concern.

Yesterday, Mr Trutnev said the inspection would be extended for a further month. Environmental officials said the execution of the project had changed so much that it was difficult to draw definite conclusions, and more study was needed. “The operator is lessening the complexity of the project, ignoring implementation of a whole raft of environmental measures,” said Dmitry Belanovich, a local environmental official.

Ian Craig, the chief executive of Sakhalin Energy, said: “We will examine the findings of the [inspection] and take the appropriate action in concert with all regulatory bodies. There is no question of our commitment to correct any errors that we or our contractors may have made.”

Yuri Trutnev, the natural resources minister, is taking a tough stance against alleged violations at the Sakhalin project,,1931491,00.html and its sister websites,,,,, and are all owned by John Donovan. There is also a Wikipedia article.

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