Kremlin orders investigaton into Shell project

Russia's environmental agency has ordered a full investigation into the Shell-led Sakhalin-2 oil and gas project.

Russia's environmental agency has ordered a full investigation into the Shell-led Sakhalin-2 oil and gas project.

But Natural Resources Minister Yuri Trutnev said the investigation should only cover environmental aspects of the $20 billion (€15.65 billion) project in Russia's far east and not interfere with the economics.

"There is no question of removing the licence because of the results of the investigation," the statement quoted Mr Trutnev as saying.

"The inspection should only examine whether the operator is abiding by environmental protection legislation, not the other aspects of resource use in Sakhalin region or offshore," he said.

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Shell has infuriated the Kremlin by doubling its estimate of the project's cost. Mr Trutnev has previously said he had to react to the cost rise because the Russian state would have to foot the bill for the extra €7.85 billion.

Last week he ordered the withdrawal of a key environmental permit for the project, but Shell says the threat has yet to materialise and work on Sakhalin-1, the world's biggest liquefied natural gas project, is continuing as normal.

Analysts have said Russia may be putting pressure on Shell and Exxon Mobil, which runs the neighbouring Sakhalin-1 project, in an attempt to renegotiate the terms for their production sharing agreements, which were drawn up in the 1990s and are far more generous than anything available today.