(Bureau of International Information Programs, U.S. Department of State) - The U.S. State Department has called on Russia to fulfull its commitments on energy, including commitments on upholding contracts made at the Summit of the Group of Eight (G8) countries in July, reports Trend.
The United States is very concerned by recent Russian government action threatening the revocation of Shell's environmental permit for the Sakhalin II oil and gas project, said State Department deputy spokesman Tom Casey September 22.
Casey spoke in response to a question about actions taken by the Russian government against Royal Dutch Shell's Sakhalin II oil and natural gas development project.
Frankly, Casey said, these recent actions cast doubt on Russia's willingness to uphold its recent commitments, including the commitments that were made by all G8 countries at the St. Petersburg [Russia] summit and those commitments including agreeing to the development of transparent, efficient and competitive global energy markets, as well as specific obligations to uphold contracts and to generate sufficient, sustainable international investments upstream and downstream in the energy sector.
In addition to a threatened environmental permit revocation, Shell faced the suspension of its talks regarding an asset swap with Russian gas monopoly Gazprom, which announced September 19 it had suspended the talks due to uncertainty
surrounding Shell's Sakhalin II project.
Royal Dutch Shell is a British-Dutch company. Casey said he was not aware of any similar actions taken against Exxon-Mobil or other U.S. companies involved in Russia's energy sector.
The Sakhalin II oil and gas project, which aims to develop vast energy deposits off the Pacific Ocean island of Sakhalin, is still in the development stage. Sakhalin II is estimated to have 17.3 trillion cubic feet of gas and 1 billion barrels of oil, according to a July 2005 statement by Shell.
Project investment costs by 2014 could be of the order of $20 billion, Shell estimated in 2005, a figure twice as high as the original estimate for the project. Some news reports have cited allegations by industry sources that this increase in estimated costs is linked to Russia's threatened revocation of Shell's environmental permit. The production-sharing agreements between Russia and several private companies, including Shell, allow the private companies to recoup their development costs before the Russian government begins to receive its share from oil and gas production.
Also involved in Sakhalin II as shareholders are the Japanese-based companies Mitsui & Co. LTD. and Mitsubishi Corporation.
In a statement and action plan issued July 16 at the St. Petersburg summit, G8 leaders said free, competitive and open markets are essential to the efficient functioning of the global energy system, and they committed their countries to establishing transparent, equitable legal and regulatory frameworks that recognize the obligation to uphold contracts and the desirability of encouraging international investment.
Leaders from G8 countries -- Canada, France, Germany, Italy, Japan, the United Kingdom, the United States and Russia -- also expressed support in principle for the Energy Charter, an international treaty that calls for open access to energy resources and transport infrastructure and related international energy cooperation.
Russian Foreign Minister Sergey Lavrov said September 24 in New York that his country is a long way from backing out of agreements we have reached, no matter how difficult the conditions were when they were agreed to, according to a statement posted on the Russian Foreign Ministry Web site.
Russian President Vladimir Putin also struck a reassuring note while visiting Paris September 22, telling journalists during a press conference with French President Jacques Chirac that rumors Russia is about to take action against a production-sharing agreement similar to Shell's by the French oil company Total are greatly exaggerated.
The State Department's deputy spokesman concluded his statement September 22 by saying the United States calls on Russia to uphold the commitments on energy, including its commitments on upholding contracts that they made at the St. Petersburg Summit.