Russia not aiming to scrap Shell deal-Lavrov

MOSCOW, Sep 27 (Reuters) Russia's foreign minister said on Wednesday the Kremlin did not want to scrap the contract for a billion Royal Dutch Shell oil and gas venture and was not seeking to push foreigners out of its energy sector.

But as Sergei Lavrov sought to soothe fears over one of the world's biggest energy projects, Russia's environmental watchdog issued yet another harsh statement, saying Shell's project might have caused ecological damage worth billion.

President Vladimir Putin, who has refrained so far from any direct comment on the project, which will ultimately supply customers in Japan and the United States, urged the government to take measures against firms breaching licence agreements.

Shell angered Moscow a year ago by doubling the estimated costs of its Sakhalin-2 oil and gas project, delivering a billion bill which, under Shell's production sharing agreement (PSA), is likely to land on the Kremlin's doormat.

The cost hike has also upset state-controlled gas monopoly Gazprom, which wanted to swap one of its fields for a quarter of Sakhalin-2, and prompted threats of investigations and the withdrawal of a key ecological permit.

The moves dismayed Japan, which needs the gas from Sakhalin, and have drawn protests from Brussels, London and The Hague.

''Assertions about 'revisions' of PSAs, and especially about squeezing foreigners out of the Russian energy sector, have absolutely no basis whatsoever,'' the foreign ministry quoted Lavrov as telling a conference on Sakhalin, the Pacific island where the project is based.

''Carrying out checks in no way means that licences for developing deposits within the Sakhalin-2 project will be withdrawn.'' Analysts saw Russia's outrage as a likely pretext for the Kremlin to force Shell and its partners, Japan's Mitsui and Mitsubishi, to concede to less favourable terms, hand over some control or even lose their licence.

Despite Lavrov's reassurance, environmental investigators and Gazprom are all still demanding answers from Shell.

BAD FIGURES Even as he spoke, investigators from the Natural Resources Ministry's environmental agency, which has led the campaign on Sakhalin-2, arrived to inspect its facilities.

''If we calculate the cost of clean up works in the Aniva Bay, the figures will look bad for Sakhalin-2,'' Prime-Tass news agency quoted deputy head of environmental agency, Oleg Mitvol.

Mitvol, who is known for strident public pronouncements and is leading the investigators, said Sakhalin-2 might have caused a damage of up to billion.

Mitvol was joined by experts from WWF International, which has repeatedly warned that Shell's offshore platforms were threatening the breeding areas of grey whales and pipeline river crossings were damaging salmon migration routes.

A one-month probe by the ministry will begin on Oct. 25.

Ian Craig, head of Sakhalin-2's operating firm, said everything possible had been done to protect the environment.

''Although the project has faced significant environmental challenges, we firmly believe these have been fully and transparently addressed,'' Craig told the conference, according to a transcript on Sakhalin Energy's Web site.

Upping the stakes in the battle over the terms of the PSA, he said the venture had pre-sold almost all its gas for more than 20 years, which could inflict even more costs on the project -- and the Kremlin -- if the terms are changed.

Sakhalin Energy officials say halting the project altogether would cost billion.

''Everybody is watching this very closely. Russia is party to this production-sharing contract and it is very important that it honours its part of the deal,'' said Brian Zimbler, partner at U.S.

law firm Leboeuf, Lamb, Greene and Macrae in Moscow.

One of the authors of Russia's PSA legislation, liberal parliamentarian Alexei Melnikov, said Russia's policies towards PSAs were irrational.

''Declarations by some officials that PSAs are unprofitable for Russia paradoxically clash with attemps by state gas firm Gazprom to get a 25-percent stake in Sakhalin-2,'' he wrote in an opinion piece in Vedomosti business daily.

Western concerns have also been raised over the neighbouring Sakhalin-1 project run by Exxon Mobil, which Russia says has breached safety rules, and BP's share in the huge Kovykta gas field in East Siberia, which is not a PSA.

REUTERS DKS PM1936