Russia Revokes Permit for Sakhalin Oil Project

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The Russian government has revoked its ecological approval for Royal Dutch/Shell's giant oilfield project off Sakhalin Island. Ecologists have complained about development of the oil field. But most industry analysts see the move as a way to put more pressure on Shell to give Russian oil companies a share in the $20 billion investment.

LYNN NEARY, host:

The European Union is criticizing Russian authorities for badgering foreign companies who are building major oil and gas facilities off the country's Pacific coast. Analysts say it's a drive to give Russian companies greater control.

NPR's Gregory Feifer reports from Moscow.

GREGORY FEIFER: The Natural Resources Ministry says it's canceling its own environmental approval for Royal Dutch Shell's massive liquefied gas project off the far east island of Sakhalin. The decision could halt work on the $20 billion, decade-long project, and the biggest foreign investment deal in Russia.

Sakhalin 2 is one of three major production sharing agreements, PSAs, the government signed in the early 1990s. Environmental groups have long warned the Shell project violates environmental rules. But economist Mikhail Subortean(ph) says the government pressure is really tied to on-going commercial disputes between Shell and the state natural gas monopoly Gazprom, over control over profits and pipelines.

Mr. MIKHAIL SUBORTEAN (Economist): (Speaking foreign language)

FEIFER: The unrelenting pressure on the Sakhalin project, he said, the constant official checks and tests, are absolutely excessive and go far beyond the bounds of reason.

Other officials have recently questioned a Sakhalin project led by French Total, and a $12 billion complex by ExxonMobile, scheduled to launch within weeks.

Japanese Mitsui and Mitsubishi companies have a combined 45 percent stake in Shell's Sakhalin 2 project, and the Japanese government has warned delays could hurt relations between Moscow and Tokyo.

Gregory Feifer, NPR News, Moscow.

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