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Thursday, 7 December 2006, 18:07 GMT

Russia ups pressure on Sakhalin

Map illustrating location of Sakhalin island Russia has suspended vital permits for Royal Dutch Shell's Sakhalin-2 oil and gas venture, in a move that may further delay the $22bn (£11bn) project.

The suspension of 12 water use licences comes two months after Moscow revoked environmental approval for the venture.

Analysts say Moscow's latest move is part of a campaign against Sakhalin-2 until Russia gets more involvement.

At present, the venture off Russia's Pacific coast is run by Anglo-Dutch Shell and two Japanese oil firms.

Shell and the two Japanese companies, Mitsui and Mitsubishi, run Sakhalin-2 through their partnership business Sakhalin Energy.

Creeping Moscow control?

Sakhalin-2 is in the process of coming fully on stream by 2008, and two 800km long pipes are being built along Russia's Sakhalin island.

The water licences that have now been suspended apply to these two pipes.

A spokesman for Sakhalin Energy said both it and its main contractor were now studying the official documentation.

Analysts say that the Kremlin is angered that Sakhalin-2 has gone over budget.

This is because under Sakhalin Energy's deal with Russia, it only has to pay Moscow royalties after it has recouped its costs.

Moscow is also said to be annoyed that no Russian firm is involved in Sakhalin-2, most notably its state-run gas monopoly Gazprom.

In the past two years, Russian authorities have threatened to take legal action against other energy projects with foreign investment, such as UK firm BP's Russian venture, TNK-BP, and US giant Exxon Mobil's control of sister project Sakhalin-1.

Moscow denies any claims that it is opposed to foreign investment.



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Related to this story:
Sakhalin operator 'breaking law' (25 Oct 06 |  Business )
Shell counters Sakhalin concerns (16 Oct 06 |  Business )
New deadline for Sakhalin project (26 Sep 06 |  Business )
Russia's Sakhalin stance queried (25 Sep 06 |  Business )
Shell faces more Russian pressure (18 Sep 06 |  Business )
Sakhalin residents call for Shell cash (27 Oct 05 |  Asia-Pacific )

RELATED INTERNET LINKS
Sakhalin Energy
Russia's Ministry of Natural Resources
Shell
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