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The Moscow Times: 12 Sakhalin-2 Licenses Suspended

Friday, December 8, 2006. Issue 3557. Page 5.
By Miriam Elder
Staff Writer

The Shell-run Sakhalin-2 project suffered a further setback Thursday when the Natural Resources Ministry suspended a dozen water-use licenses for the project’s main subcontractor.

The decision against on-shore pipeline builder Starstroi comes after months of threats to take concrete legal or state action against the embattled project.

The ministry’s water resource agency gave Starstroi, which is half-owned by a subsidiary of Italy’s Eni, two months to fix the violations or face the withdrawal of 12 key licenses.

The company will have to halt work at the 12 sites, said Anna Khitrova, a spokeswoman for the water resource agency. The ministry has singled out poor pipeline construction over salmon-filled rivers as a key complaint against the project.

“They cannot work in the areas where these licenses have been suspended, they can only carry out corrective measures,” Khitrova said.

Starstroi spokesman Vladimir Kukharev, reached by telephone after working hours in Sakhalin, declined to comment. He earlier told Reuters that the license suspension “should not affect the schedule as the pipeline construction and the river crossings have been 90 percent completed already.”

The company addressed all issues raised by the ministry’s environmental watchdog in an August inspection, Kukharev said. The firm would send a report detailing that to the water resource agency next week, he added.

The Natural Resources Ministry has been locked in dispute with project operator Sakhalin Energy for months, but the move against Starstroi represents the first concrete step taken since September, when the ministry said the environmental license for the second phase of the project was under serious review.

Sakhalin Energy, which runs the project for Shell and Japan’s Mitsui and Mitsubishi, insists it has cleared up all environmental violations.

“Sakhalin Energy and Starstroi remain committed to addressing any new issues that may result from the latest audits with the same efficient and fast manner which was used to address non-compliances” found in previous checks, Sakhalin Energy spokesman Ivan Chernyakhovsky said.

The ministry’s environmental watchdog wrapped up a two-month audit of the project last month. The deputy head of the agency, Oleg Mitvol, has said the violations are so severe that he will seek to bring Sakhalin Energy to court to demand compensation.

Prosecutor General Yury Chaika lent support to the idea earlier this week, saying: “If there are sufficient grounds, the decision will be made to open a criminal case.” On Wednesday, regional prosecutors in Sakhalin said they had uncovered more than 100 violations of environmental, labor and migration law at Sakhalin-2.

Starstroi, a 50-50 joint venture between Eni’s Saipem subsidiary and LUKoilneftegaz, is also a contractor on the CPC pipeline.

The government’s campaign against Sakhalin-2 is widely seen as a way of putting pressure on Shell to ensure Gazprom gets a stake in the project on favorable terms.

Gazprom and Shell last year reached preliminary agreement on giving the state-run gas giant a 25 percent stake in the project, but the talks were derailed when Shell doubled its cost estimate to $22 billion.

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