After the Russian government announced its withdrawal of environmental approval for the Sakhalin-2 liquefied natural gas (LNG) project on Sep. 18, Alexander Losyukov, Russia's ambassador to Tokyo, said on Wednesday that the construction continues as stated on their contract.

The Russian Ambassador mentioned that Sakhalin-2, the world's largest privately funded energy project due for completion in 2008, will offer oil and LNG to Japan after 2007 as planned if environmental concerns were solved. Russian officials said the project was ignoring environmental standards and revoked a permit for the project on Sep. 18.

Royal Dutch Shell holds a 55 percent stake in the project, and the rest is divided between Japan's Mitsui Co. and Mitsubishi Co. Shell denies that it has failed to meet the standards. Japan, where utilities are dependent on Sakhakin-2 for 8 percent of the country's gas needs, is anxious about possible business interruption.

Losyukov said Russia had no intention of closing down the project over claims of environmental damage during a press conference at the embassy. He added, however, the production-sharing agreement on the project, which was concluded more than 10 years ago, does not satisfy us at all at present, it is not profitable for Russia and we will not sign such agreements in the future.

Russia Japan