Reuters: Dutch confident Russia will solve Sakhalin row

15 Nov 2006 16:42:52 GMT

THE HAGUE, Nov 15 (Reuters) – The Dutch government is confident that Russia will solve a dispute over the $20 billion oil and gas Sakhalin-2 project and abide by international law, Dutch Economy Minister Joop Wijn said on Wednesday.

The project, led by Anglo-Dutch oil major Shell has come under pressure from Russian authorities since Shell announced last year that costs there would double.

“The Russian government assured me, and at this moment I have no reasons to doubt it, that they will stick to international law … and contracts will be served,” Wijn told Reuters in an interview.

“At this moment we have the impression that there is no need to doubt that they will find a solution,” he added.

Wijn, who visited Moscow last month to discuss Sakhalin among other things, said it would also be in the interest of Russia if the rule of law prevailed and the country demonstrated it had good and predictable investment climate.

The rise in Sakhalin costs angered Russian gas export monopoly Gazprom , which was hoping to swap a stake in a Siberian field against 25 percent in the project.

Russia’s environmental watchdog said last week it was prepared to take Shell’s project to court to win damages and might even try to scrap the production sharing agreement under which it operates. Wijn said he believed the environmental issues were minor.

“There are environmental issues to discuss, which in my opinion are minor. There are also financial issues, which are currently being negotiated,” he said.

“What I understand is that meanwhile the construction goes on, so there is no delay in the physical side of this contract,” Wijn added.

Russia has attracted international criticism over the mounting pressure on Sakhalin-2, widely seen as an attempt to force Shell and its partners Mitsui <8031.T> and Mitsubishi <8058.T> to concede to less favourable terms and to limit foreign involvement in Russia’s strategic energy sector.

Import-dependent Japan is looking to Sakhalin — the world’s largest single oil and gas project — to meet much of its future energy needs. Japan said in September a major delay could hurt diplomatic ties.

The European Commission said at the time it too was taking the developments around the project very seriously.

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