RIA Novosti: Watchdog wants Sakhalin Energy stripped of water use licenses

21:15 | 14/ 11/ 2006 

MOSCOW, November 14 (RIA Novosti) – The Russian environmental watchdog suggested Tuesday revoking water use licenses from the international consortium operating the Sakhalin II oil and gas project, off Russia’s Pacific coast.

The watchdog said the Sakhalin Energy consortium, led by Royal Dutch Shell, is in breach of Russia’s environmental regulations, and asked the agency overseeing the use of water resources to consider stripping it of 19 licenses.

Russia’s Natural Resources Ministry said Monday it is dissatisfied with the environmental measures taken so far by the operator of the Sakhalin II project in Russia’s Far East.

The multibillion-dollar 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 activities of the project’s operator, Sakhalin Energy, uncovered 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.

“Measures proposed by Sakhalin Energy Company to compensate for damages inflicted on Sakhalin’s environment do not take into account all violations,” the ministry said in a press release.

The ministry said Sakhalin Energy proposed collecting and preserving pinecones to restore hundreds of hectares of coniferous forest on Sakhalin.

The ministry said Sakhalin Energy acknowledged the island’s 529 rivers needed to recover following work by the project’s contractors.

The ministry also quoted media reports that the company “concealed information on serious threats to the island’s environment during the project’s development.”

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 by 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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