Russian Audit Chamber, UK ambassador discuss Sakhalin II

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The head of Russia's Audit Chamber and the British ambassador to Russia held talks Tuesday to discuss Sakhalin II, a huge oil and gas project in Russia's Far East led by British-Dutch oil major Shell.
MOSCOW, October 31 (RIA Novosti) - The head of Russia's Audit Chamber and the British ambassador to Russia held talks Tuesday to discuss Sakhalin II, a huge oil and gas project in Russia's Far East led by British-Dutch oil major Shell.

The multibillion-dollar Sakhalin II project has been accused of inflicting large-scale damage to the ecosystem on Sakhalin, including illegal deforestation, the dumping of toxic waste, and soil erosion.

The Audit Chamber's press service said that Sergei Stepashin had informed Anthony Brenton about the chamber's inspections of the project.

The production-sharing agreement behind the Sakhalin II, which allows the project operator, Shell-controlled Sakhalin Energy, to comfortably recoup all its expenses before sharing any profits with the state, is hugely unpopular with Russia's government.

The operator's decision last year to double the project's cost put off the date by which the government will receive its profit share.

Stepashin "informed the British diplomat of the results of Audit Chamber checks, which showed that the main problem is in the increase of planned expenses by 2010 to $22.2 billion as compared to $12.04 billion. He also said that this problem has no political aspect," the Audit Chamber's statement said.

At the talks, Stepashin also highlighted the environmental impact of the project, which has been the focus of attention of Russia's environmental watchdog and Natural Resources Ministry.

Natural Resources Minister Yury Trutnev said last week that Sakhalin II could be suspended in some sections, and urged the project operator to submit plans to fix environmental violations.

Stepashin and Brenton agreed that the sides must cooperate to resolve contentious issues arising from the project's production-sharing agreement, signed in 1994 when the oil price was much lower and Russia lacked the resources to engage in oil and gas projects of such a scale.

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