"The company is telling us what to do and where to go," Mitvol thundered. "This is the territory of the Russian Federation, in case you have forgotten."
Sakhalin:
Posted on 10/01/2006 11:07:50 AM PDT by A. Pole
YUZHNO-SAKHALINSK -- Oleg Mitvol, the state official leading the charge against Shell's Sakhalin-2 venture, warned Thursday that he would seek to shut down work at the $20 billion project for purportedly causing $50 billion of damage to the environment.
"The project must be stopped and all that's been done must be reworked," Mitvol, deputy head of the Natural Resources Ministry's environmental watchdog, told reporters after a daylong tour of sites that have borne the brunt of the project's environmental effects.
"For every destroyed tree or damaged river, we want to bring a criminal case," Mitvol said. The Natural Resources Ministry has threatened to revoke the environmental license of Sakhalin-2's second phase, which could halt or delay production of liquefied natural gas, or LNG, at a plant on the island's southern tip.
Sakhalin Energy, the Shell-led company running the project, rejected Mitvol's criticism and said it had done nothing to be ashamed of.
The onslaught by Mitvol and other state officials, including Natural Resources Minister Yury Trutnev, has led to concerns that environmental issues are being used in an effort to give the state a bigger slice of the project's profits.
State-controlled Gazprom has been angling for a stake in Sakhalin-2, and government discontent has grown over the terms of the production sharing agreement under which Shell has been developing the field.
Shell angered the Kremlin and Gazprom last year when it doubled the estimated cost of the project to $20 billion, effectively passing on the extra cost to the government.
Foreign Minister Sergei Lavrov, who has been the government's top speaker at the island's oil and gas conference this week, struck a softer tone at a news conference Thursday.
"In my contacts with the leaders of Sakhalin Energy, I have seen their sincere desire to resolve these problems," Lavrov said in televised remarks. "I am convinced that a dialogue with the relevant Russian government agencies ... will allow these issues to be settled."
But Mitvol did not appear ready for peace talks.
A 1990s-era business associate of Boris Berezovsky, Mitvol has in recent years cultivated the image of the nation's most rambunctious environmental crusader. After infamously razing Moscow region dachas over environmental violations, he appears to have made Sakhalin the next target of what often seems to be a one-man show.
Mitvol's campaign turned into a tense standoff Thursday when Sakhalin Energy officials temporarily prevented him from taking a group of reporters and environmental campaigners out in a small ship to examine the offshore fields.
Yet Mitvol seemed more eager to prove that a Western-run company has to play by Russia's rules.
"The company is a guest here, not the landlord," Mitvol told Mike d'Ardenne, a Sakhalin Energy marine adviser who was attempting to prevent Mitvol's ship from sailing. D'Ardenne claimed that the ship held too few life preservers for the large group of environmentalists and reporters.
"The company is telling us what to do and where to go," Mitvol thundered. "This is the territory of the Russian Federation, in case you have forgotten."
The ship was finally able to make the windy voyage to a site within a kilometer of the project's large liquefied natural gas platform after a telephone call from Sakhalin Energy chief Ian Craig, a source with the company said. A second ship with extra life preservers, in accordance with international maritime law, followed, he said.
Craig maintained that he had had no official contact with Mitvol or his inspectors, but had received all his information about the allegations against Sakhalin Energy through the press.
It remains unclear how much actual power Mitvol wields. His environmental review, due to be finished by Oct. 20, could be used as the basis for the Prosecutor General's Office to revoke environmental approval of Phase 2 of the project.
Officials with Sakhalin Energy at the LNG plant said work on the project, which is about 80 percent completed, was continuing as usual.
"We've received no official order to suspend any work," said Alexei Okhotnikov, head of government relations for Sakhalin Energy.
Around 9,500 people are currently working at the plant, building administrative offices and fitting pipelines for the LNG that is due to start being exported by 2008.
Shell holds a 55 percent stake in Sakhalin-2 and Japan's Mitsui and Mitsubishi together hold the remaining 45 percent.
Environmentalists warn that the project is causing untold damage to the island's largely untouched forests, rivers and seas, and is harming feeding and breeding grounds for salmon, crab, scallops and the endangered western gray whale.
"This is the most damaging of all oil projects" currently being carried out in Russia, said Ivan Blokov, campaign director for Greenpeace Russia.
Sakhalin Energy was supposed to dig up 150,000 cubic meters of soil when building the LNG plant, but instead tore up around 2 million cubic meters, dumping the dirt into the sensitive Aniva Bay and causing untold harm to sea life in the area, environmentalists said Thursday.
"We don't care if it's a Western, Russian or Japanese company that's working here, but that they do it right," said Ralf Sonntag, country director of the International Fund for Animal Welfare, or IFAW.
The world's remaining 100 western gray whales are unique to the bay, IFAW officials said, feeding in its waters from May to September before heading south to breed. The western gray whale was declared extinct in the 1930s, until Russian sailors spotted a few in the 1980s.
"It's almost like we've got a second chance to save them," said Clare Sterling, an IFAW spokeswoman aboard the ship.
Recently spotted whales have shown evidence of weight loss, she said. "We're very worried that noise levels from construction work and drilling are putting them off feeding."
"It will take decades for the natural environment to recover," said Igor Chestin, head of the World Wildlife Fund in Russia, clad in a wetsuit on the deck of the ship after returning from a dive that he said showed signs of damage to the seabed.
Sakhalin Energy has insisted that it has abided by Russian and international environmental standards and sees no reason for its environmental approval to be revoked.
"We have nothing to hide and nothing to be ashamed of on Sakhalin," Chris Finlayson, president of Shell Exploration and Production Russia, said Thursday, Reuters reported.
A visit to one site on Thursday showed extensive environmental damage, with felled trees, exposed pipeline, and evidence of a recent mudslide into a stream that hosts breeding salmon.
"Here you can see the dead trees -- the company simply didn't pay attention," Mitvol said atop a large mound of dirt. He pointed to dried-up rivulets that he said showed mudslides could cause huge damage once oil and gas started flowing through the pipelines.
"In the case of a landslide, there is a 99 percent chance that all the oil will go into the river," Mitvol said, warning of a "serious ecological catastrophe" at the site, between the Podgornaya and Ai rivers.
Yet a Sakhalin Energy engineer passing through the location said that construction at the site had been stopped because of safety and environmental concerns.
"To the untrained eye it looks like a disaster, but this is a work in progress," said construction engineer Joshua Ogunyannwo, adding that the site was one of the four worst out of hundreds that could be visited.
The site of the mudslide would be cleaned up and grass replanted before the season's first snow, expected in around three weeks, he said. "Our priority is the rivers," he added.
Craig told the conference Wednesday that subcontractors hired by Sakhalin Energy could be to blame for the damage. "Control of subcontractors on onshore pipelines in particular has been unsatisfactory," he said.
Mitvol said his agency would take a close look at Starstroi, a Russian company that carries out engineering, construction and maintenance work on pipelines.
Yet he continued to focus his attention mainly on Sakhalin Energy.
At one point, those aboard the ship with Mitvol heard a loud explosion ring out. Then, a great plume of smoke billowed from the small mountains that line the island's shore.
"Either that's Sakhalin Energy shooting at us and missing, or they're doing more work for which they don't have a permit," Mitvol said.
Sakhalin Energy's Okhotnikov said later, however, that the blast had come from a private quarry that had no relation to the project.
Sakhalin:
Russia/China,Chavez do the same thing. Have superior western technology and investment come in and find the oil.Then steal the project under nationalization(aka Theft). Disgusting backwaters the lot of them.
Exactly. The way a modern oil concession works is that a company puts up the entire cost of the project itself, has so many years to recover the costs of the project and is guaranteed a certain profit margin. The government, the real owner, puts up nothing, receives a guaranteed percentage of the profit, which is to say "the remainder", and at the end of the concession period assumes control of the entire project. At that point it either operates it itself, or puts it up for bid again.
That is why unexpected costs are "passed to the government". The oil company is acting as the government's contractor, in effect. If the government wants to institute additional environmental protections that increase the cost of the project, wonderful, but the government's agent (Shell, in this case) gets to recover that cost.
The damage to the environment is very real:
"This officially confirms the problems the project has had regarding pipeline construction and erosion control, which have been raised by WWF over the last two years. The pipelines run 800 kilometres, the length of Sakhalin Island, crossing 1,000 watercourses.
The project has breached local and international construction standards over the last few years despite calls for standards to improve. The decision to cancel the permit comes at a crucial time as the European Bank for Reconstruction and Development (EBRD) are considering whether to approve a loan to the project, which would give it environmental and social credibility."
(Shell's Sakhalin II environmental oil permit cancelled)
You see, Russia will not become a banana republic - it is too cold for bananas. Yeltsin is gone and never will return.
The way this is usually handled is for the owner, in this case Russia, to have a team of inspectors and auditors who oversee the project. The concessionaire can't simply add costs without the owner's permission. These projects are high enough profile that even the national president is aware of the details.
The owner's project team is often backed up by sharp-eyed foreign auditors who are looking to make their bones, often US but not necessarily. Even so-called third-world countries are these days pretty sophisticated about using the system to their advantage. They have the option of going after you in their own courts or in US courts, or maybe both at the same time. If the lending is handled through Euro banks, they may go after you in German courts, whatever is more to their advantage.
If they don't think they are getting a fair shake from their concessionaire, there are usually mechanisms built into the contract for a "divorce", and the project can be put up for bid again.
You assume that Russia is at the disadvantage here. The one who is at risk is the one putting up the $20 billion, trusting that he won't be simply booted out of the country after the project is built. With a small country, you might have some recourse through the lending agencies, but with a larger country that isn't much of an option.
There is another issue. In the US, local governing agencies usually get a piece of the action in the form of country and state taxes. In most countries that is not the case, the central government gets all of the revenue from the project. Consequently, and I have seen this personally, the local governments have no incentive at all for the project to go forward. They can be very obstructionist. They get a couple of advantages out of this:
First, the oil company often has more influence with the central government than they do. By putting pressure on the oil company, they can get the oil company to be their spokesman with the central government for whatever is the issue of the moment.
Secondly, they often trade their acquiescence to the project for help with local infrastructure projects that technically should come from the central government, but often don't in a timely fashion.
Thirdly, don't discount corruption as a motive. Often in demanding an infrastructure project in exchange for ending some act of obstruction, they will demand not the actual work, but an account with the equivalent amount of cash. I can tell you that when you execute the work itself, instead of handing over the cash, you can have some very angry local officials on your hands.
Of course, all of this adds to the cost of the project, and has to be cleared by the central government. No one should ever doubt that building a major project in a foreign country will teach you more about how politics really work, and human psychology, than you will ever learn any other way.
Excuse me, I meant to say "county and state taxes"...
Don't misunderstand anything I've said, though. If I were handling this account for the Russian government, and the cost estimate suddenly doubled, I would immediately invite competing firms to re-estimate the project.
Looks like Putin is helping criminal oligarch associates shake down businesses to line their Swiss Bank accounts even more.
Watermelons. Green on the outside, Red on the inside.
But what should be expected of the man whose signature brought the Kyoto Treaty into effect?
"For every destroyed tree or damaged river, we want to bring a criminal case," Mitvol said."
Great!
But when do we get our first prosecution for the Communist Genocide of 100 million in the last century?
Who would you name as perpetrators? And who were the main victims?
But when do we get our first prosecution for the Communist Genocide of 100 million in the last century?==
Heirs of Stalin is Georgia. Call to them.
Ah - so youre another one that believes there were no Russians in the Kremlin during the 20th century.
Ah - so youre another one that believes there were no Russians in the Kremlin during the 20th century.==
Why you alway fall into 2 mutually exclusive states? One: onle russians are responsible for USSR and no russians are responsible for USSR.
It is so usual for ukranians to fall into those:).
I'd say millions times already that I stands for "the russians TOGETHER with other minorities of former Russian Empire including ukranians, jews, poles, georgians, latvians and so on are responsible for USSR". Because they all were involved in defending and building the USSR. USSR itself designed in such manner to emphasize that it is no Russia since it doesn't carry name "Russia" even in name of state.
Now compare it with GDR(german democratic republic), PNR(polish peoples republic) and so so on. When you get it?:)
I showed you many times that just one eloquent fact contradicts your "only russian" mantra. No russians were the supreme leaders of USSR ever until Gorby but he is one who destroyed USSR.
Now think yourself!
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