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RIA Novosti: Sakhalin Energy has one more week to fix violations – minister

13:34 | 01/ 11/ 2006

MOSCOW, November 1 (RIA Novosti) – Sakhalin Energy, the Shell-controlled operator of the Sakhalin II oil and gas project in Russia’s Far East, has one more week to rectify environmental violations, Russia’s natural resources minister said Wednesday.

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

Yury Trutnev said Sakhalin Energy has so far failed to submit its plans on this issue to the ministry.

“The term set by the company itself expires tomorrow. Out of politeness, we’ll wait for another week,” he said.

During his visit to Sakhalin last week, Trutnev warned that Sakhalin II could be suspended in some sections, and gave the environmental watchdog – the Federal Service for the Oversight of Natural Resources – another month to complete its inquiry into alleged violations.

Trutnev said the operator’s violations were punishable under at least five statutes of Russia’s Criminal Code.

British-Dutch oil major Shell holds a controlling 55% stake in the Sakhalin II deposits. Japan’s Mitsui and Mitsubishi own 25% and 20%, respectively.

As well as the environmental issue, the production-sharing agreement behind Sakhalin II, which allows Shell to comfortably recoup all its expenses before sharing any of its profits with the state, is hugely unpopular with the Russian government.

The Sakhalin II project comprises an oil field with associated gas, a natural gas field with associated condensate production, a pipeline, a liquefied natural gas plant and an LNG export terminal. The two fields hold reserves totaling 150 million metric tons (1.1 billion bbl) of oil and 500 billion cubic meters of natural gas.

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