Russia files suit to suspend Sakhalin 2 project
Eric Watkins
Senior Correspondent
LOS ANGELES, Sept. 6 -- Russian environmental authorities have filed suit to suspend Sakhalin 2, following a month-long investigation into the oil and natural gas development project off Russia's Pacific Coast. The suit coincides with other government investigations into the project.
The Federal Service for the Supervision of Natural Resources is trying to halt construction of a pipeline, citing its potential harm to the environment. In taking this action, FSSNR is trying to overturn the approval granted by Russia's Natural Resources Ministry (NRM) in 2003.
The suit is said to be motivated by Russia's desire to expand its interest in the Sakhalin project by pressuring the firms involved. The current shareholders are Shell Sakhalin Holdings BV, which has a 55% share in the project, Mitsui Sakhalin Holdings BV, which has a 25% share, and Diamond Gas Sakhalin, a Mitsubishi company, with a 20% share.
In August, NRM issued a statement calling on the consortium to suspend pipe-laying work on Sakhalin, citing possible mudslides on the Pacific island. NRM said it had received a report showing the pipeline could be damaged by mudslides where it meets the coast and crosses the hundreds of rivers and streams on the island.
At the same time, Russia began a separate month-long financial audit of the Sakhalin 2 project which coincided with negotiations between the Sakhalin Energy consortium and OAO Gazprom on the state-run firm's efforts to acquire a stake in the project.
On Sept. 6, the economics ministry said it wanted to complete that financial audit of Sakhalin 2 by yearend.
Costs on the project are said to have doubled to about $20 billion, with rising commodity prices across the world. As a result, Gazprom wants to reduce the stake on offer, saying the value of the asset has fallen.
Deputy Economics Minister Kirill Androsov said the feasibility study requires detailed analysis to determine whether the additional expenses are justified. He hoped the study would be complete by yearend, and said it should not interfere with the project.
Contact Eric Watkins at [email protected].