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Fri, Sep 22, 2006 - Page 10 News List

Japanese firms talking to Russia over Sakhalin-2

AFP , TOKYO

Japanese stakeholders in the huge Sakhalin-2 energy project said yesterday they will continue negotiating with Russia after it revoked a permit in an apparent bid to reassert control over its resources.

On Monday Russia canceled an environmental permit for a Shell-led consortium to develop the fields, threatening a halt to work on the US$20-billion project and sparking a sharp riposte from Japanese government officials.

Two Japanese trading companies -- Mitsui and Co and Mitsubishi Corp -- hold a 45 percent stake in Sakhalin-2, the world's largest privately funded energy project designed in part to supply oil and gas for energy-short Japan.

"We need to continue the project construction without delay," said Mikio Sasaki, chairman of Mitsubishi Corp. "It is very important for both Russia and Japan to succeed with the Sakhalin-2 project."

"We will make the utmost effort to start the operation smoothly," he said at a news conference.

"We realize the significance of the environmental issue," Sasaki said, adding: "Sakhalin Energy consortium has paid the largest possible consideration [to the environment] in its construction."

A Mitsui spokesman, who declined to be identified, said the company is asking the consortium to investigate the claims made by Moscow.

Russia's cancelation of the environmental permit is widely seen as the latest example of Moscow taking a tough line to reassert control over strategic energy resources.

The two Japanese firms indicated they could consider handing over part of the ownership of the project to Russia's state-run Gazprom to persuade the Russian government to retract the cancellation.

"Nothing concrete has been decided but we are considering the possibility," the Mitsui spokesman said.

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