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. Last Updated: 07/27/2016

Trutnev Issues Sakhalin Deadline

Sakhalin Energy, the company running the Sakhalin-2 oil and gas project, has one month to address environmental violations before authorities stop the company's work, Natural Resources Minister Yury Trutnev said Tuesday.

"If the ministry and the company reach a solution, the project will not be stopped," Trutnev said at a news conference. "We want to correct the violations without halting the project."

The announcement looked to be a signal to investors that the Shell-led project, which earlier appeared to have been targeted by federal authorities, could still be saved.

Last week, Trutnev took steps to revoke the environmental approval for the second phase of Sakhalin-2. The approval for phase two -- known as the State Expert Environmental Review, or SEER -- was granted in 2003.

The second phase of Sakhalin-2 is expected to lead to the production of liquefied natural gas, or LNG, at a plant on the southern tip of the island. The plant is still under construction.

The second phase also features construction of about 800 kilometers of pipeline to transport oil and gas within the island in the Far East.

Officials at Sakhalin Energy did not answer phone calls Tuesday evening.

Federal authorities cited damage to the island's natural riches, including salmon breeding streams and abundant forests, in their decision to withdraw Sakhalin-2's SEER.

The ministry's environmental concerns coincide with growing frustration among government officials with the terms of the project's production sharing agreement.

Trutnev said the ministry would be reviewing the licensing terms for another production sharing agreement, or PSA -- Total's Kharyaga project in northern Russia.

On Tuesday, Trutnev refused to comment at length on Kharyaga. "There are questions related to the pace of the project's development, but they are not critical just yet," he said.

The licensing agreement for TNK-BP's Kovykta gas project will also come under review at the end of 2006 or in early 2007, Trutnev said.

As for Sakhalin-2, Trutnev reiterated Tuesday that the environmental stamp of approval initially granted to Sakhalin Energy fell far below present-day standards.

"I can assure you that if such a SEER had been submitted for review in 2006, it would never have been approved," Trutnev said, adding that it was his predecessor, Vitaly Artyukhov, who gave the green light to the project despite environmentalists' complaints.

Asked why it took the ministry so long to respond to those complaints -- Trutnev was appointed to head the ministry in March 2004 -- Trutnev blamed lack of coordination between government agencies.

Trutnev also acknowledged that some of his subordinates may not have been open about some of the project's environmental dangers.

The minister noted that he recently suspended temporarily the Sakhalin staff at the Federal Service for the Inspection of Natural Resource Use.

"I told my people in Moscow to form their own group and fly out there to investigate the problem," he said.

Trutnev refused to comment on possible delays to LNG deliveries scheduled to start in 2008 but assured foreign companies working in Russia that there was no campaign against them, despite widespread speculation to the contrary.

"We respect the importance of the project," he said of Sakhalin-2. "Foreign investors working in Russia should know that, if Russian laws are obeyed, they can be confident about the future."