Russia hits Shell with Sakhalin licence suspension

MOSCOW, Dec 7 (Reuters) Russia has stepped up pressure on Royal Dutch/Shell's Sakhalin-2 venture by saying on Thursday it had suspended some permits in a move that could cause further delays to the billion project.

Russia's resources ministry said in a statement its water resources agency had suspended 12 water-use licences of Sakhalin's top contractor Starstroi, a joint venture between Russian firms and Italy's Saipem. It gave Starstroi two months to put the violations right.

''During the suspension period they cannot start new work, but can only rectify violations,'' Anna Khitrova, a spokeswoman for the agency, told Reuters.

Russia's technical watchdog RosPrirodNadzor, part of the ministry, did a major inspection of the project in November. It has said it could sue Sakhalin Energy to make it pay billions of dollars in fines for violating Russia's environmental laws.

Russia's prosecutor general's office has said it is considering opening criminal cases against the consortium.

Sakhalin Energy, the Sakhalin-2 operating company, said in a statement that it and Starstroi were analysing the documents and orders from the water resources agency.

''We remain committed to address any new issue resulting from the latest checks by RosPrirodNadzor, prosecutors and other authorities in the same efficient and fast manner as was used to correct the non-compliances identified during August checks,'' the group said in a statement.

Starstroi said suspension of the licences would not delay Sakhalin-2.

''It should not affect the schedule as the pipeline construction and the river crossings have been 90 percent completed already,'' said Starstroi's spokesman Vladimir Kukharev.

''Next week we will send the water resources agency our report on resolving the issue,'' Kukharev said.

He said the firm had already resolved all the problems raised after the August inspection.

Ecological campaigners at pressure group Bankwatch, which has long protested against Sakhalin-2, said without water-use permits the group would not be able to finish building onshore pipelines.

The 800 km (500 mile) pipelines are due to bring oil and gas from offshore fields in Sakhalin's north to the island's south, where an oil export terminal and one of the world's largest gas liquefaction plants is being built.

The group has already postponed its first shipment by six months to summer 2008 after doubling its cost estimates last year.

The hike in costs infuriated Russia's gas monopoly Gazprom as the announcement came days after it agreed to take 25 percent in Sakhalin-2 in exchange for a gas field in Siberia.

REUTERS SBA DS1540