Dec 12, 2006, 12:00 GMT
Moscow - A Russian environmental official on Tuesday said Royal Dutch Shell's Sakhalin-2 oil and gas development had caused 10 billion dollars in ecological damage and that the country's environmental watchdog would sue the project in international courts.
Oleg Mitvol, head of the watchdog, Rosprirodnadzor, said his agency would sue the 20 billion-dollar Sakhalin-2 project in Russian, Swedish and possibly other jurisdictions in March.
The announcement came as media reported Shell had offered Russian state-owned gas monopoly Gazprom, which has made clear its interest in entering the project, control over Sakhalin-2.
Russia's largest energy project is currently 55-percent owned by Netherlands-based Shell, and 25 and 20-percent, respectively, by Japan's Mitsui and Mitsubishi. Shell subsidiary Sakhalin Energy is the project's contractor.
With its main fields 18 kilometres off the coast of Russia's Pacific Sakhalin Island, the project has come under fire this fall as Mitvol and his agency have alleged a host of environmental violations.
Many have called the pressure a means to improve Gazprom's bargaining position.
Gazprom and Shell spokesmen confirmed Monday that Shell head Jeroen van der Veer had offered Gazprom new terms to enter the project.
Russian media on Tuesday said van der Veer had offered the Russian giant 30 per cent of its own stake, and 10 per cent of each of the Japanese companies' stakes.
'Empoloyees of Gazprom and Shell know that van der Veer offered the Russian concern control over the project,' Russian daily Vedomosti said, without identifying its sources.
Shell representatives told Deutsche Presse-Agentur dpa Tuesday that they could not comment on the deal.
Gazprom spokesman Sergei Kupriyanov said Monday that his company - the world's third-largest energy firm, after Shell and Britain's BP - would 'consider' the proposal, taking the environmental violations into account.
Shell signed a so-called production-sharing agreement (PSA) with Russia in 1994, allowing the firm to develop an estimated 500 billion cubic metres of gas and 150 million tons of oil reserves around Sakhalin. Under the terms of the PSA, Russia would begin to collect a share from sales only after Shell recouped its construction costs.
Those construction costs have since ballooned to 20 billion dollars, from earlier estimates of 10 billion dollars - keeping Moscow from accessing oil and gas revenue it wants.
Mitvol, the environmental official, said the agency would sue the project in the Stockholm Arbitration Court under New York law - as per the PSA - and in Russian courts for violations that fall outside the PSA.
He also said cases were possible in English, Belgian, US, Japanese and Italian courts.
The 10 billion dollars in damage, Mitvol said, was a preliminary estimate expected to be finalized in the summer. Scientists from NGOs and the government-connected Russian Academy of Sciences will help formulate damage estimates, he added.
A separate criminal case on the environmental damage could be taken up by the Russian Prosecutor General's office, Mitvol said.
Shell had not commented on the announcements as of Tuesday afternoon.
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