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Watchdog to sue Sakhalin Energy in intl court for concealing info

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Federal Service for Natural Resources Oversight plans to file a lawsuit in an international court against Sakhalin Energy for "concealing substantial information," Oleg Mitvol, deputy director of the watchdog, said at a news conference Tuesday, ITAR-TASS reported.

The Federal Service for Natural Resources Oversight is currently in talks on the issue with a U.S. legal firm, he added.

Sakhalin Energy, which is the operator of the Sakhalin-2 oil and gas project near Sakhalin Island, concealed information about an audit confirming the possibility of mudslides in the project area, Mitvol said.

The Russian government may also file a suit seeking compensation for lost profits under the Sakhalin-2 project, he said.

The Sakhalin-2 project is developed under a production sharing agreement (PSA) between Sakhalin Energy and the government. Both the government and the company are expected to receive profits from the project. The government is expected to compensate for Sakhalin Energy's costs by giving the company part of its share of oil until the project breaks even.

Sakhalin Energy has sought to increase the project's spending plan, which would reduce the government's profit from the project. Russian officials have criticized the proposal.

Mitvol also said that the Federal Service for Natural Resources Oversight planned to continue its inspection of Sakhalin Energy's Sakhalin-2 oil and gas project in early December or in February 2007.

In September, the Natural Resources Ministry cancelled the Sakhalin-2 project's environmental approval. Mitvol said then that Sakhalin Energy would have to stop operations due to the cancellation.

The service has accused Sakhalin Energy of committing numerous environmental violations, including conducting illegal logging operations and failing to adhere to the terms of its water use license.

The Sakhalin-2 project area has oil reserves of 150 million tonnes and gas reserves of 500 billion cubic meters.

Shell Sakhalin Holdings BV, a subsidiary of Royal Dutch/Shell, owns a 55% stake in Sakhalin Energy, while Mitsui Sakhalin Holdings, a subsidiary of Japan's Mitsui, has a 25% stake and Diamond Gas Sakhalin, a subsidiary of Japan's Mitsubishi, holds a 20% stake.

© Prime-Tass

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