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Shell Fixes Sakhalin Violations

MAKAROV, Sakhalin -- Royal Dutch Shell said it had taken less than one month to sort out most of the environmental violations identified at its Sakhalin oil and gas project, but a federal investigation continues.

"We have addressed the violations very quickly, but we had to divert resources from pipeline construction," Wayne Harris, Shell's health and risk assurance manager at the pipeline, told reporters last week visiting a 30-kilometer section 220 kilometers north of Yuzhno-Sakhalinsk, the region's capital.

"We had issues with sub-contractors, and it is generally a very challenging project. But we have addressed 90 percent of the violations ... raised by RPN last month," Harris said, referring to the Natural Resources Ministry's environmental regulator by its acronym.

The pipeline stretch was portrayed on state television as an environmental disaster zone when the regulator -- the Federal Service for the Inspection of Natural Resources Use -- opened its investigation last month. But Shell said the violations were minimal, otherwise it could not have rectified them so quickly.

The regulator has threatened to withdraw permits from the $20 billion project and force Shell to reroute pipelines, which Shell has said may further delay the program.

Many analysts have interpreted the environmental complaints as a Kremlin ploy to win for a state-owned firm a portion of the Sakhalin-2 production sharing project, which will ultimately supply gas to U.S. and Japanese customers. Natural Resources Minister Yury Trutnev will visit Sakhalin from Oct. 24 to 26 to hear what his inspectors have found.

David Greer, deputy chief executive of project operator Sakhalin Energy, said he was looking forward to seeing Trutnev and discussing the project, which he said was on track to make its first shipment of liquefied natural gas next summer.

"I think it could be earlier than September. We're sticking to our deadline of mid-2008," he said.

"There are factors in Russia which go into the category of 'unknown unknown.' There is an element of float in our schedule but our customers should consider the summer of 2008 as the date of delivery of the first cargo and we have come to an agreement with them to work under this schedule."

Greer said if Russia stopped the project, it would do great harm to its reputation and cause much more environmental damage than Sakhalin Energy has been accused of, as well as causing yet more costs.

"If the project was put on ice for a year and contractors magically resumed work from where they had finished, the loss would amount to tens of billions of dollars," he said.

The pipelines, some 850 kilometers long, will cross the entire island and pass under 1,100 rivers to bring offshore oil and gas from north Sakhalin to the island's south, where an oil terminal and the world's largest LNG plant are being built.

As the pipeline gets closer to the south it crosses difficult, hilly terrain. "We have rearranged the storage area, protected river crossings and made sure there would be no mudslides," said Michael Franley, a construction manager.

The pipeline is being built by StarStroi, a venture of Italy's Saipem and Russian firms, which has hired many Russian sub-contractors.

(The Moscow Times 16.x.06)

 
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