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Reuters: Russian watchdog may claim $30 bln Sakhalin damage

Tue Dec 12, 2006 11:25 AM GMT

MOSCOW, Dec 12 (Reuters) – Russia’s environmental agency said on Tuesday it may triple a damages claim against the Royal Dutch Shell-led (RDSa.L: Quote, Profile , Research) Sakhalin-2 energy project to $30 billion after being advised to do so by Western lawyers.

The outspoken deputy head of the agency, Oleg Mitvol, who has repeatedly accused Shell of breaching environmental law on the Pacific island of Sakhalin, said he was determined to press ahead with legal action regardless of Shell’s future role.

Industry sources told Reuters on Monday Shell was prepared to cede control of the $22 billion project to state gas monopoly Gazprom (GAZP.MM: Quote, Profile , Research).

Such a deal would appear to mark a victory for the Kremlin, determined to wrest control over the “commanding heights” of the Russian economy, and a retreat by Shell.

Gazprom said on Monday it was analysing the proposal but added all environmental issues must first be resolved. These include accusations of illegal forest clearance, dumping soil in rivers and polluting one of the island’s bays.

“We will prepare legal proposals for the government of how we should evaluate damages within the next week or 10 days. Then we will determine the terms and the timeframe for the signing of contracts with legal advisers,” Mitvol told reporters.

“We will be ready to take legal action from March.”

He said the agency’s initial estimates showed the Sakhalin Energy group, which also includes Japan’s Mitsui (8031.T: Quote, NEWS , Research) and Mitsubishi (8058.T: Quote, NEWS , Research), should pay $10 billion in damages.   Continued…

© Reuters 2006. All Rights Reserved

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