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RIA Novosti: Project operator, watchdog agree timeframe to fix Sakhalin II-1

MOSCOW, April 16 (RIA Novosti) – Russia’s environmental watchdog has coordinated with Sakhalin Energy that operates the Sakhalin II oil and gas project off Russia’s Pacific Coast a schedule for fixing damage caused by the project, the natural resources ministry said Monday.

Sakhalin Energy submitted a plan of measures to remedy environmental damage March 20.

The ambitious project, formerly led by Anglo-Dutch oil major Shell, was subjected to months of intense pressure last year from Russian authorities, who accused it of causing serious environmental damage to Sakhalin Island, including deforestation, toxic waste dumping and soil erosion.

The plan was prepared with the participation of energy giant Gazprom, now a major shareholder in the Sakhalin II project.

In December 2006, Gazprom acquired a 50% plus one share in the Sakhalin II project for $7.45 billion. Shell previously held a 55% stake, while Japan’s Mitsui and Mitsubishi owned 25% and 20%, respectively.

The plan will help implement the Sakhalin II project “in compliance with the highest environmental standards and in full compliance with Russian legislation,” Sakhalin Energy said in its accompanying letter to the plan.

Most of the measures will be implemented by the end of 2008, Sakhalin Energy said.

Earlier, Russia’s Audit Chamber assessed environmental damage inflicted by the project at $5 billion.

Natural Resources Minister Yuri Trutnev is satisfied that Sakhalin Energy has presented in a timely manner a more specific plan, approved by Gazprom, that takes into account the remarks issued by the Federal Service for the Oversight of Natural Resources (Rosprirodnadzor), the ministry said.

Sakhalin II comprises an oil field with associated gas, a natural gas field with associated condensate, a pipeline, a liquefied natural gas plant (LNG), and an LNG export terminal. Most of the LNG from the project will be exported to Japan, which is seeking to diversify its energy imports.

The project’s two fields have estimated reserves of 150 million metric tons (1.1 billion barrels) of oil and 500 billion cubic meters of natural gas.

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