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Shell: environmental concerns addressed CEO van der Veer says Russia’s concerns at Sakhalin ‘fully and transparently addressed;’ ministry says no formal plan received Alex Nicholson Associated Press Business Writer
The head of oil producer Royal Dutch Shell PLC said Oct. 16 that the company had addressed Russia’s environmental concerns at its troubled $20 billion liquefied natural gas project on the eastern island of Sakhalin.
The case, which saw Russian regulators freeze a key environmental permit in September, has rattled investors who suspect the charges are being used to pressure the company to reshape the original 1990s deal to the Kremlin’s benefit.
“This project has faced significant environmental challenges,” Shell’s Jeroen van der Veer told a conference in Moscow. “We firmly believe that these have been fully and transparently addressed.”
Russia’s Natural Resources minister, Yuri Trutnev, has given the Shell-led consortium until the end of October to propose ways to rectify the alleged violations, which include claims that the oil project has illegally felled trees and damaged streams and rivers.
On Oct. 16, Trutnev said that if the company’s plan was acceptable, the development wouldn’t be stopped. He said had received assurances from Van der Veer that Shell was working to resolve the problems, but he noted that “absolutely any sanctions” were possible if the proposals proved unsatisfactory.
A spokesman for the ministry said no formal plan had yet been received from the company.
Analysts see link to drive to increase state control Shell’s Sakhalin-2 project is one of a handful of major oil field developments signed in the 1990s by BP PLC, Exxon Mobil Corp., and Total SA to have come under closer environmental scrutiny in recent months in what analysts have linked to a drive to increase state control of the energy sector.
Russian officials say those deals were unfair for Russia, signed when the country lacked the money to get such challenging developments under way independently. Control was handed to foreigners who were allowed to recoup their costs before the state takes a share of the profits.
Shell enraged the Kremlin last year when it said its costs would more than double to over $20 billion. That announcement came soon after talks began on an asset swap deal that would give Russia’s OAO Gazprom gas monopoly a 25 percent stake in the project.
Analysts have said the environmental claims could lead to a renegotiation of the deal in which the state receives a share of the profits sooner or Gazprom gets a bigger share in the consortium.
Shell’s van der Veer said Oct. 16 that he “welcomed” the proposed entry of Gazprom into the project.
The natural resources ministry also has been reviewing the licenses of Russian companies, including No. 1 producer Lukoil. However, some observers have suggested that those checks are aimed at shaking off charges of bias over the audits of foreign-led projects.
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