'Deep concern' over Sakhalin-2 fracas


Russia's decision to revoke environmental approval for the £10.6 billion Sakhalin-2 project, the world’s biggest oil and gas venture, prompted a volley of ripostes from London, Tokyo and the EU yesterday.

Russia's Natural Resources Ministry on Monday withdrew environmental permits for the project in two fields in the Sea of Okhotsk off Russia's Far Eastern island of Sakhalin, alleging foreign firms such as Shell violated their terms.

The British government said it was "deeply concerned".

EU energy commissioner Andris Piebalgs said he took the announcement "very seriously indeed".

"In order to ensure that companies are willing to invest in multi-billion euro energy projects, a secure and predictable investment climate is necessary in Russia as in the EU or indeed any country," he said.

The head of the International Energy Agency, Claude Mandil, said Russia's investment climate may deteriorate as a consequence.

The Sakhalin-2 project aims to produce 9.6 million tonnes of liquefied natural gas to countries including Japan from 2008.

Royal Dutch Shell, Japanese trading houses Mitsui and business giant Mitsubishi, are key investors in the project.

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