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Russia Muscling in on Sakhalin 2 2006-09-19

Posted by clype in Articles of Interest, Discovery, Money.
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Japan has warned that its relations with Russia could be hurt by Moscow’s withdrawal of environmental approval for the ‘Sakhalin 2’ oil and gas project.

The comments come a day after Russia’s resources ministry cancelled its backing for the giant project in the Pacific Ocean.

Analysts say Moscow wants to pressure ‘Sakhalin 2’s’ Western owners to open up the project to Russian firms.

At present ‘Sakhalin 2’ is owned by ‘Royal Dutch Shell’, ‘Mitsui’ and ‘Mitsubishi’.

‘Sakhalin 2’ is the only major energy project in Russia currently without any Russian involvement. Anglo-Dutch group ‘Shell’ has a 55 per cent majority stake, while Japan’s ‘Mitsui’ has 25 per cent and ‘Mitsubishi’ has 20 per cent.

However, ‘Shell’ has already said it would allow Russia’s gas monopoly ‘Gazprom’ to buy a 25 per cent stake in the project.

‘Negative influence’

Although ‘Sakhalin 2’ is now producing a small amount of oil, the giant scheme is not due to come fully on stream until 2008.

Japanese government spokesman Mr.Shinzo Abe, who is favourite to become the country’s next prime minister, said Japan was unhappy with the possibility of delays to the scheme.

‘I am concerned that major delays might have a negative influence on overall Japan-Russian relations,’ he said.

On Monday, ‘Shell’ said that there were no legal grounds for Russia’s resources ministry to cancel environmental approval for ‘Sakhalin 2’.

European Union Energy Commissioner Mr.Andris Piebalgs said he took Moscow’s announcement of the cancellation of the environmental permit for ‘Sakhalin 2’ ‘very seriously indeed’.

‘In order to ensure that companies are willing to invest in multi-billion euro energy projects, a secure and predictable investment climate is necessary in Russia as in the EU or indeed any country,’ he said.

‘Without this, investment in new energy projects will be highly problematic, providing uncertainties for the world’s future energy supply.’

Giant reserves

‘Sakhalin 2’ is estimated to have total reserves of about one billion barrels of oil and 500 billion cubic metres of gas, making it one of the world’s largest combined oil and gas projects.

‘Shell’ is said to see ‘Sakhalin 2’ as vital to building its business in Japan, China and Korea.

However, the scheme has attracted criticism from Western environmental groups as it is located close to an important breeding ground for grey whales.

Meanwhile, US Amercian giant ‘Exxon Mobile’ said reports of a 32 per cent cost increase for its separate ‘Sakhalin 1’ project were premature and misleading.

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