The country's environmental watchdog annulled last Monday the Sakhalin Environmental Expert Review (SEER) passed in 2003 over an alleged threat of mudslides near the project's pipeline. Royal Dutch Shell, the project's lead company, had already suspended work on several stretches covering 7 kilometers (4 miles) overall on the 800km (500 miles) line.
Minister Yury Trutnev said, "Companies [involved in the project] must adopt design and technological solutions to ensure that the pipeline is safe, otherwise we will, with great regret, be unable to allow the project to be implemented further."
He said the project did not pose much threat at the moment. "But if the pipeline bursts after being launched, it will not be just oil leak, it will be an environmental disaster," he warned.
Experts from the Federal Service for the Oversight of Natural Resources have said the company has failed to build anti-erosion facilities near the pipeline under construction, and that they registered excessive disposal of industrial wastewater from the Molikpaq offshore production platform.
The revocation of the expert review's conclusions put in jeopardy Sakhalin Energy's contracts with Japan, South Korea and the United States on supplies of LNG, due to go into effect in 2008.
The $20-billion Sakhalin-II project comprises an oil field with associated gas, a natural gas field with associated condensate production, a pipeline across the island leading to a liquefied natural gas plant and an LNG export terminal in the south of the island. The two fields hold reserves totaling 150 million metric tons of oil and 500 billion cubic meters of natural gas.
Sakhalin Energy comprises Shell Sakhalin Holding (55%), Mitsui Sakhalin Development (25%) and Mitsubishi-controlled Diamond Gas Sakhalin (20%).
Trutnev said the environmental violations of the world's biggest integrated oil and gas project also involved illegal tree felling, damage to the water resources by breaking construction regulations, and illegal deepening of the sea bottom.
The federal environmental watchdog has said it would conduct an inspection from September 25 until October 20 that would cover forest reserves, water facilities adjacent with the pipeline, and the construction of a terminal in Aniva Bay. Particular attention will be paid to recommendations in the state environmental study of the Piltun-Astokhsky and Lunsky license areas, it said.
Trutnev said a group of environmental experts would fly to Sakhalin for the inspection.
"We will base our decision on their conclusions," Trutnev said.
But the minister said the authorities understood only too well how valuable the project is for the Russian economy, and would do their best to remedy the situation without halting the project.
"We think everything possible must be done to rectify the situation and continue the project," Trutnev said.
He added that Sakhalin Energy had received 60 recommendations from the Russian authorities but 30 of them remained unfulfilled.
"There have been problems and complaints ... for four years now," he said.
Trutnev also said the heads of territorial bodies of Russia's environmental watchdog had been fired over the situation around Sakhalin II.
"I can say a totally simple thing: when we started to dig into the situation, after a check by the Federal Service for the Oversight of Natural Resources, I had to dismiss last week all territorial leaders of the service's bodies," Trutnev told journalists.
