September 27, 2006	Wednesday	Ramazan 3, 1427

MOSCOW, Sept 26: Russia on Tuesday turned up the heat on foreign oil companies operating in the country, telling Shell it would have to clean up environmental damage on Sakhalin Island and warning Total and TNK-BP of impending inspections.

Russian Natural Resources Minister Yury Trutnev warned that the Shell-led Sakhalin-2 oil and gas development project off Russia’s Pacific coast would be halted unless Shell corrected environmental damage done to the site.

“We will do everything possible not to stop the project,” Trutnev told a press conference.

“We are convinced that the company must correct the ecological damages. If that does not happen, we will unfortunately not be able to allow the project to continue.”

He also announced that French group Total and British-Russian joint venture TNK-BP would face inspections of their activities at two major energy fields in northern Russia.

The announcements fit a pattern of Russian government pressure on foreign oil companies, particularly those which signed production sharing agreements (PSAs) with the Russian state in the 1990s.

As well as Total, Exxon of the United States has a PSA agreement for the Sakalin-1 project and Anglo-Dutch group Shell has a controlling stake in Sakalin-2, the world’s biggest privately financed oil and gas project.

The PSAs were agreed in the 1990s at a time of low global oil prices and a period of weak Russian government.

The agreements are now seen as outdated and unfavourable to the Kremlin, which has put a policy of bringing the strategic oil industry under state control at the centre of its agenda.

Analysts have suggested that environmental concern is being used by the government as a pretext for action against foreign oil companies. They contrast the concern about Sakalin and

Total’s activities against lax enforcement of environmental regulations elsewhere in Russia.

The natural resources ministry last week withdrew a key environmental permit for the Sakhalin-2 project — operated by Shell and two Japanese partners — signalling that work should be halted.

The move provoked protest from European and Japanese authorities but was applauded by international environmental groups including Greenpeace and the Worldwide Fund for Nature.

Environmental groups have argued that the project damages the natural habitat of the endangered Western grey whale and harms fishing, a key industry for the people of Sakhalin.

The Total project in northern Russia, the Kharyaga field, has been the object of bitter dispute for years, with the Russian government accusing Total of excessive delays in completing work.

Relations between Russian state-controlled gas giant Gazprom and BP-TNK have also been rocky, with Gazprom blocking TNK-BP from developing its Kovykta gas field for several years.

Russian business daily Vedomosti reported earlier this month that Gazprom was in talks to buy up to half of TNK-BP in a deal that could be worth $25 billion.

Trutnev said on Tuesday that the Total-led Kharyaga oil field and TNK-BP Kovykta gas field would both be inspected.—AFP