OilVoice - Sakhalin II Phase 2 Update

Sakhalin II Phase 2 Update

Tuesday, September 19, 2006

Sakhalin Energy CEO, Ian Craig, has provided the following update on developments regarding the Russian Ministry of Natural Resources' decision to revoke the SEER 600 - the environmental permit for the Phase 2 Project.

"On Saturday 16 September, a public statement was issued by the General Prosecutor’s (GP) Office of the Russian Federation concerning the opinion of the GP's Office on the legality of Ministry of Natural Resources (MNR) order 600 that approved the 2003 SEER conclusion for Sakhalin II Phase 2. The statement, which is defined as a protest, expressed the view that the MNR order had been issued illegally.

On Monday 18 September, MNR issued a press release stating that it had considered the protest of the GP's Office and had taken a decision that the order 600 should be invalidated. MNR stated that it had issued a relevant instruction that will become valid after approval by Rostekhnadzor, the technical evaluation agency of the MNR.

It should be noted that none of these developments relate to the existing Phase 1 activities which are not impacted in any way.

I recognise that these events may give rise to concern but every effort is being made with the relevant authorities to resolve this issue in the best interests of all stakeholders."