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RIA Novosti: Sakhalin II may be suspended in some sections – minister

17:45 | 27/ 10/ 2006 

MOSCOW, October 27 (RIA Novosti) – The Shell-led Sakhalin II hydrocarbon project in Russia’s Far East could be suspended in some sections, Russia’s natural resources minister said Friday.

The multibillion-dollar Sakhalin II project has been accused of inflicting large-scale damage to the ecosystem on Sakhalin’s, including illegal deforestation, the dumping of toxic waste, and soil erosion.

Yury Trutnev said the project would not be suspended in its entirety before the operator submits plans to fix environmental violations.

Trutnev, echoing Russian senior authorities’ earlier assurances, said: “I have not said that we will freeze the Sakhalin II project entirely, but the situation is very complex. I would like to see the proposals to fix the violations.”

Trutnev lashed out at Sakhalin Energy, the operator of the giant oil and gas project: “What I saw on Sakhalin surpassed even my worst expectations.”

“Much of what is happening there is not a result of incorrect project solutions, but of gross violations in the course of the project’s implementation by contractors,” he said.

The minister said certain activities of project contractors and operators violated the Russian Criminal Code. He said the results of investigations into the violations will be handed to the Prosecutor General’s Office in two weeks, and the operator could face criminal charges.

Earlier this week, Trutnev gave the country’s environmental watchdog another month to complete its inquiry into the alleged violations.

The minister said the operator pledged to correct some of the problems on its own, but that many violations had caused irreparable environmental damage, for which the company will have to compensate. He did not specify figures, but said the compensation will be considerable, even for a large company like Sakhalin Energy.

Shell holds a controlling 55% stake in the Sakhalin II deposits being developed under a production-sharing agreement. Japan’s Mitsui and Mitsubishi own 25% and 20%, respectively.

The PSA schemes introduced in the early 1990s to attract foreign investors allow companies involved to comfortably recoup all expenses before sharing any of their profits with the state.

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