RIA Novosti: $300,000 in Sakhalin II environmental damage

10/11/2006 18:54 MOSCOW, November 10 (RIA Novosti) – Contractors in the Sakhalin II oil and gas project in Russia’s Far East have paid the first two tranches, worth over eight million rubles ($300,000), in compensation for damage inflicted on forests, the environmental watchdog said Friday.

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

A probe launched into the activity of project operator Sakhalin Energy found numerous violations of conditions set out in the feasibility study for Sakhalin II, including the illegal routing of an oil pipeline through the territory of a national conservation area and environmental damage in the island’s Aniva Bay.

“The money will be transferred to the federal budget. I do not know what it will be spent on, it is up to the Finance Ministry to decide,” said Oleg Mitvol, deputy head of the Federal Service for the Oversight of Natural Resources.

He said the payments made up for only two violations out of hundreds, and accounted for a small share of the damage inflicted on the environment. “These only concern the forests,” he added.

Yury Trutnev, the minister of natural resources, earlier gave the environmental watchdog time until late November to complete its inquiry into alleged violations and prepare a comprehensive report on environmental damage within four months.

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.

On September 18, the Natural Resources Ministry annulled its own 2003 Sakhalin Environmental Expert Review (SEER), which gave the project a positive evaluation, following action from prosecutors.

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 barrels) of oil and 500 billion cubic meters of natural gas.

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