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International Herald Tribune: Russian authorities suspend licenses of Sakhalin-2 subcontractor

The Associated Press
Published: December 7, 2006

MOSCOW: Russian water protection authorities have suspended the licenses of a subcontractor of the Shell-led liquefied natural gas project Sakhalin-2 because of alleged violations, officials said Thursday.

The company, Starstroi, has two months to correct the problems or it will see its 12 licenses annulled, the Natural Resources Ministry said in a statement.

Starstroi had violated water regulations in the course of pipe-laying work, the ministry said.

Shell representatives were not immediately available for comment.

Russian officials have threatened since the summer to pull key permits at the Sakhalin-2 development and hit it with economic sanctions.

Observers, however, contend that the attention is aimed at pressuring Shell to secure more favorable terms for state-controlled gas monopoly OAO Gazprom to join the project, and comes as the Kremlin is increasing its role in the lucrative energy sector.

Shell enraged the Kremlin at the end of last year when it announced that the cost of the project would double to US$22 billion. Russian officials have yet to approve the costs, which under the terms of Shell’s original agreement must be paid in full before Russia can receive a share of the profits.

The Sakhalin Energy consortium is 55 percent controlled by Shell.

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