Please remember that as you read this, this is REUTERS take on what's up ...

Russia softens rhetoric on Shell, keeps tough talk

Source: Reuters

By Tanya Mosolova

MOSCOW, Oct 27 (Reuters) - Russian Resources Minister Yuri Trutnev softened his rhetoric against the Shell-led Sakhalin-2 project on Friday but repeated that the venture could be halted if its environmental record was not up to scratch.

"It is hard to suspend a project with so much investment and so many employees. We would regard that as an extreme measure. We will try not to suspend it," Trutnev told a news conference on his return to Moscow after a trip to Sakhalin, the Pacific island where the $22 billion oil and gas venture is based.

"During the trip I didn't say the project might be halted. But there are loads of things that might force us to take actions that would themselves suspend the project," he said.
"I think the company is doing outrageous things. Unfortunately the picture I got was even worse than I expected."

Trutnev's campaign of environmental inspections on Sakhalin-2 is due to last another month and is likely to yield a rash of alleged violations by the project, which is building the world's biggest liquefied natural gas plant.

He has also contacted prosecutors, since he thinks some breaches of environmental rules may constitute crimes. (I posted some fascinating looks at this some months back.)

"It's not up to the Resources Ministry. But it's obvious that there are some signs of violations of a criminal nature. I have talked about it to the Prosecutor General and he promised to treat it with the utmost seriousness."

The Prosecutor General's office this week vowed to take a tough line on any environmental wrongdoing by oil firms.

However, President Vladimir Putin has so far not commented on Sakhalin-2 and other foreign oil projects which are under fire from officials, such as TNK-BP's Kovykta gas field and the Exxon-led Sakhalin-1 project.

EXXON NEXT?

Trutnev said he had not had time to inspect other companies as closely as Sakhalin-2. Asked about Sakhalin-1, he said he had not yet decided whether it would face similar charges.
"We can't inspect two projects of that size at the same time. That's why we haven't yet begun any checks on Sakhalin-1."

Analysts say the pressure on foreign oil firms may be designed to increase Kremlin control in the lucrative sector.

On the way to Sakhalin, Trutnev's plane stopped off in western Siberia, Russia's oil heartland, where he briefly inspected other firms' facilities. But he said they were fairly blameless by comparison. (By what real comparison? It's ALL environmental disaster.)

"During the trip we went with the intention of finding some faults. But we didn't see anything to worry us greatly. In general the situation at the facilities didn't give us reason for concern."

(Remember the catch phrase of this century .. Stay the Course ....)

Another western firm, operating the only production sharing agreement apart from Sakhalin-1 and -2, is France's Total . Trutnev said inspectors had identified some licence violations at its Kharyaga PSA and Total had been given time to resolve the problems. (yeah, like forever ...)

"If it does, we have no other claims against the Kharyaga project," he said.


The loudest rhetoric is that directed at Shell and its partners in Sakhalin-2, Japan's Mitsui & Co. <8031.t> and Mitsubishi Corp. <8058.t>.

They have also infuriated Russia's state-controlled gas monopoly Gazprom by doubling the project's cost estimate, ruining the neat mathematics of a swap deal in which Gazprom would get a 25 percent stake in Sakhalin-2.

Trutnev said he had never discussed the Sakhalin-2 issue with Gazprom, and only heard about its negotiations with Shell through the media.