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BBC News: Russia ups pressure on Sakhalin

Sakhalin
 
(Sakhalin-2 is off Russia’s Pacific coast)

Russia has suspended vital permits for Royal Dutch Shell’s Sakhalin-2 oil and gas venture, in a move that may further delay the $22bn (£11bn) project.

The suspension of 12 water use licences comes two months after Moscow revoked environmental approval for the venture.

Analysts say Moscow’s latest move is part of a campaign against Sakhalin-2 until Russia gets more involvement.

At present, the venture off Russia’s Pacific coast is run by Anglo-Dutch Shell and two Japanese oil firms.

Shell and the two Japanese companies, Mitsui and Mitsubishi, run Sakhalin-2 through their partnership business Sakhalin Energy.

Creeping Moscow control?

Sakhalin-2 is in the process of coming fully on stream by 2008, and two 800km long pipes are being built along Russia’s Sakhalin island.

The water licences that have now been suspended apply to these two pipes.

A spokesman for Sakhalin Energy said both it and its main contractor were now studying the official documentation.

Analysts say that the Kremlin is angered that Sakhalin-2 has gone over budget.

This is because under Sakhalin Energy’s deal with Russia, it only has to pay Moscow royalties after it has recouped its costs.

Moscow is also said to be annoyed that no Russian firm is involved in Sakhalin-2, most notably its state-run gas monopoly Gazprom.

In the past two years, Russian authorities have threatened to take legal action against other energy projects with foreign investment, such as UK firm BP’s Russian venture, TNK-BP, and US giant Exxon Mobil’s control of sister project Sakhalin-1.

Moscow denies any claims that it is opposed to foreign investment.

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