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    Russia's environmental watchdog probes Sakhalin Energy violations

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    MOSCOW, August 31 (RIA Novosti) - Russia's environmental protection agency has completed the first part of a comprehensive audit of Sakhalin Energy activities under the massive Sakhalin-II energy project off the country's Pacific coast, the agency said Thursday.

    The Federal Service for the Oversight of Natural Resources started the inspection of Sakhalin Energy's alleged violations of ecological legislation and project specifications on July 25 on the orders of Natural Resources Minister Yury Trutnev.

    The first part of the probe included a thorough study of documentation concerning three offshore production platforms: the Molikpaq, which will start year-round oil production next year, and platforms in the Piltun-Astokh and Lunskaya license areas, as well as the pipelines connecting these platforms with the shoreline.

    Experts found the company had failed to check the condition of abandoned wells at both fields in order to ensure the protection of water resources from pollution, the agency said in a news release.

    The company also failed to submit timely reports on all prospecting and geological works, the document said.

    "In addition, Sakhalin Energy has consistently violated the schedule for submitting statistical reports on water consumption," the agency said. "In 2005, the Federal Service for the Oversight of Natural Resources registered excessive disposal of industrial wastewater from the Molikpaq platform, which is a violation of the Russian Water Code."

    The Natural Resources Ministry and the environmental protection agency will conduct the second phase of the Sakhalin-II audit in September-November 2006. It will include on-site inspection of all facilities under the project.

    The Sakhalin-II project comprises an oil field with associated gas, a natural gas field with associated condensate production, pipeline, a liquefied natural gas plant and an LNG export terminal. The total reserves of the two fields are 150 million metric tons of oil and 500 billion cubic meters of natural gas.

    Sakhalin Energy faces another potential setback after the Russian Academy of Sciences submitted a report to the Natural Resources Ministry highlighting geological processes endangering shoreline-pipelines as part of Sakhalin II.

    The report said about 20 kilometers (12.4 miles) are under threat from floodwaters, which could endanger human lives as well as lead to an environmental disaster, and suggested suspending the construction of the pipelines while an environmental report is conducted to identify ways to reduce the risk of pollution.

    The Russian government has threatened to sue Shell, which holds a majority stake in Sakhalin Energy Investment Company, if it fails to suspend work on the pipeline, though some analysts have interpreted the move as a wave to pressure the British/Dutch company to a deal with Gazprom. The energy giant is looking to gain a 20% share in the Sakhalin project in return for a 50% stake in a massive Siberian field.

    The environmental agency also said Thursday it had asked prosecutors to investigate whether any forestland had been destroyed or damaged illegally in the laying of a shoreline pipeline.

    The Sakhalin-II product sharing agreement was signed in 1994 between Russia and the Sakhalin Energy Investment Company, which currently comprises Shell Sakhalin Holding (55%), Mitsui Sakhalin Development (25%) and Diamond Gas Sakhalin (20%). It was the first PSA to be signed in Russia and came into force in 1996.

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