Russia may sue Royal Dutch Shell's Sakhalin group in international courts to claim billions of dollars in damages or even scrap the $22 billion production sharing deal, a Russian official said on Friday, according to Reuters. Oleg Mitvol, deputy head of environmental agency RosPrirodNadzor, said his agency had received a plan from Sakhalin-2 on how the company intended to rectify ecological damage but considered that it was "not serious". "We are talking to lawyers and determining our position to file for damages according to international law. The place would be Stockholm and it would be the law of New York," Mitvol said. The Sakhalin-2 oil and gas project has come under pressure since last year when it doubled cost estimates for the world's largest liquefied natural gas (LNG) scheme. Shell declined to comment on Mitvol's remarks and the fate of the production sharing agreement (PSA), which was signed in the mid-1990s when Russia was desperate to attract foreign money at a time of low oil prices. The Kremlin is now seeking to limit foreign involvement in the strategic energy sector and has also threatened ventures involving BP Plc and Exxon Mobil with legal and administrative measures. On Friday BP's joint venture TNK-BP said it had paid $1.44 billion in back taxes, a source close to the company said. The doubling of costs has infuriated Russian gas monopoly Gazprom, which was planning to take a quarter of the project, and analysts say the pressure is designed to force Shell to cede a stake cheaply, or face further delays. Sakhalin-2 is due to supply clients in Asia and the United States from mid-2008 and Shell has said that any significant delay would damage Russia's reputation and cost the country and the company up to $10 billion in lost profits. The agency accuses Sakhalin-2 of polluting the bay near the LNG plant and cutting too many trees while building an 800-km (497 miles) pipeline across the Pacific island. The Sakhalin Energy group, minority owned by Japan's Mitsui and Mitsubishi, had earlier said it had put most of the violations right. On Friday, it said it had this week filed an environmental action plan covering issues from river crossings to management of excavated soil. It said it would revise the plan as soon as it got the official results of site inspections. Mitvol said he did not like the new action plan.
