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REGNUM: Oleg Mitvol: Russia pays in oil for approvals of Sakhalin 2 project

“If we manage to resolve the problem of the 529 rivers whose ecology has been damaged by the Sakhalin 2 project and a number of other vital problems of Sakhalin, they may depict us in whatever way they like. ‘Do what you can and come what may.’ Ask questions to those people who looked at those problems through rose-colored glasses,” the deputy head of the Rosprirodnadzor (Russian Ecological Control Department) Oleg Mitvol said during an online-conference at REGNUM on Nov 27, when asked “why the work on the projects on Sakhalin reek of mere populism.”

“As a Russian citizen, I have even more questions to the people who have signed those extremely unprofitable contracts. The contracts allow for any expenses. As a result, Sakhalin law enforcers told us that one year ago they visited a private security firm just to see that the local employees got wages worth million rubles. They did everything in line with their contract with the company and everything fit smoothly into the contract expenses; meanwhile Russia paid in oil: some $4bln — all this money has been pumped out from Russia’s bowels. There were lots of approvals, each made by some firm, and everything was in line with the contract expenses… It was a kind of new business: we can approve whatever you please? They made lots of senseless approvals, spent lot of money on documents and experts. As many as 10,000 approvals were registered as costs. And Russian citizens paid for them.”

Mitvol notes that the contract is signed in such a way that nobody will be able to ask anything: “One should not have kept silence about this situation, and this is for the Public Prosecutor’s Office to find out why this all happened. The local company enjoys a very strong administrative resource. Everybody is speaking about some honest foreign investors fighting the hands of the Kremlin – Gazprom. In my recent interview to one TV channel, I spoke about the personnel of that company … and they cut that part of the interview… Sakhalin-Energy has a serious resource… Very many officials would love to see the company’s expenditures growing at the expense of the state… I don’t believe that any officials can avoid punishment for wasting the mineral wealth of our country. Sooner or later, they will have to answer some questions.”

“The Sakhalin-2 production sharing contract says that, when the company recovers all its expenses, Russia will get 10% of the profit. Why in other countries the investor gets 30% and the state 70%, while in Russia the state gets 10% and the investor 90%?” wonders Mitvol.

As REGNUM reported earlier, the Sakhalin 2 project is carried out on the basis of a production sharing contract and provides for the development of the Piltun-Astokh and Lunsky fields, whose recoverable reserves make up 150mln tons of oil and 500bln c m of gas, respectively.

The shareholders of the project operator, Sakhalin Energy, are Royal Dutch, Shell, Mitsui and Mitsubishi. The second project provides for the construction of 800-km oil and gas pipelines from northern to southern Sakhalin. The pipelines will transport gas and oil to the local LNG Plant and oil terminal.

In 1996-2006 the investments in the Sakhalin-2 project made up $12.5bln. The production sharing contract stipulates that the Russians should pay 6% royalties. Till 2045 Russia will get $50.1bln from the project. and its sister websites,,,,, and are all owned by John Donovan. There is also a Wikipedia article.

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