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Environmentalists suspend work on Sakhalin II

MOSCOW, July 27 (RIA Novosti) - The Sakhalin Energy company, the operator of the Sakhalin II project, was compelled to suspend the construction of a plant producing liquefied natural gas (LNG) because of problems with environmentalists. Analysts say the strong protests from environmentalists are only one instrument in the tough battle for Sakhalin's natural resources, the daily newspaper Nezavisimaya Gazeta reported.

The Sakhalin Regional Court overruled the State Ecological Expert Commission's approval to construct a quay in the Aniva Bay. The court's decision could lead to a revision of not only the investment component of the project, but also of the timeline for the pipeline's commencement, with 2008 being the deadline.

Such a situation cannot satisfy the investors (Royal Dutch/Shell owns 55%, Sakhalin Holdings B.V., a subsidiary of Mitsui, owns 25% and Diamond Electric Sakhalin B.V., a subsidiary of Mitsubishi, has 20%) because the greater part of the project's resources is included in contracts.

Shell recently signed a memorandum with the Russian gas monopoly, Gazprom, on exchanging a stake in Sakhalin II (25% + 1 share) for the right to take part in the development of a deposit in Western Siberia. This move by the British-Dutch company may be motivated by a wish to secure support by a major Russian state-run concern, considering that problems associated with the project occasionally crop up. According to the Japanese media, it is highly probable that Mitsui and Mitsubishi will take similar actions.

Analysts suppose that rivalry among the numerous Sakhalin projects may be involved in the "environmental problems" of Sakhalin II. U.S. capital has a big share in the Sakhalin I project and, since the export of hydrocarbons to the countries of the Asia-Pacific region is envisaged in both projects, the U.S. may not want Sakhalin II resources on the rival markets of Japan, Korea and especially China.

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