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No court action for Sakhalin II environmental damage - Mitvol

MOSCOW, March 29 (RIA Novosti) - No court action will be initiated against the Sakhalin II operator for environmental damage incurred during the implementation of the major oil and gas project in Russia's Far East, an environmental regulator said Thursday.

The ambitious project, formerly led by Anglo-Dutch oil major Shell, was subjected to months of intense pressure last year from Russian authorities, who accused it of causing serious environmental damage to Sakhalin Island, including deforestation, toxic waste dumping and soil erosion.

Oleg Mitvol, deputy head of the Federal Service for the Oversight of Natural Resources, said Sakhalin Energy had admitted and pledged to rectify all violations.

Before Russian energy giant Gazprom [RTS: GAZP] took over Sakhalin Energy in late 2006, the company claimed it would file a lawsuit against the Russian government, Mitvol told a press conference.

He said damage assessment would be completed by late summer. Earlier, Russia's Audit Chamber assessed environmental damage inflicted by the project at $5 billion.

Sakhalin Energy submitted a Gazprom-approved plan of measures to the Ministry of Natural Resources earlier in the month to remedy environmental damage caused by the project. The company pledged to implement most of the measures by the end of 2008.

In December 2006, Gazprom acquired 50% plus one share in the Sakhalin II project for $7.45 billion. Shell previously held a 55% stake, while Japan's Mitsui and Mitsubishi owned 25% and 20%, respectively.

Sakhalin II comprises an oil field with associated gas, a natural gas field with associated condensate, a pipeline, a liquefied natural gas plant (LNG), and an LNG export terminal. Most of the LNG from the project will be exported to Japan, which is seeking to diversify its energy imports.

The project's two fields have estimated reserves of 150 million metric tons (1.1 billion barrels) of oil and 500 billion cubic meters of natural gas.

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