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Shell-led Sakhalin-2 To Spend $5 Million On Whale Research

Dow Jones Business News

30th January 2003

MOSCOW -(Dow Jones)

A consortium led by the Royal Dutch/Shell Group that is drilling off Russia's Sakhalin Island said Thursday it intends to spend $5 million to fund more research on the endangered gray whale.

Over the past year, oil companies working around Sakhalin have come under increased criticism from environmental groups for conducting seismic research near the whales' feeding grounds. Critics say the loud noises scare the whales away and discourage them from feeding, leaving them emaciated.

Sakhalin-2 operator Sakhalin Energy Investment Co. already has spent $2 million on gray whale studies and has budgeted the additional $5 million over a five-year period beginning in 2003, Sakhalin Energy chief executive Steve McVeigh told journalists on 30 January.

Sakhalin Energy - whose other shareholders include Mitsui and Co. Ltd. and Mitsubishi Corp. - wants to set up an independent council to administer the program, and is inviting specialists from other Asian countries such as Korea, Japan and China to participate in the studies.

"We're contributing to the (research program) but we don't want to run it," McVeigh said. "Our core business is oil and gas, not whale research."

Sakhalin Energy hopes to include state agencies, federal research institutes and non-governmental organizations "to add credibility to the program, opening it up to broader participation," he said.

McVeigh noted that no study has shown the connection between seismic studies and emaciated whales.

The company also has turned to neighbouring oil and gas consortium Sakhalin-1, led by ExxonMobil (XOM), which has expressed interest but has yet to commit money.

Environmentalists and local fisherman have said that Sakhalin-2's dumping of drilling waste - which sometimes contains high levels of toxic compounds - in the sea has led to a shrinking population of fish.

Despite Sakhalin Energy's earlier explanations - that the fish could have died or moved away for other natural reasons - the company said it now re-injects most drilling wastes back into the ocean floor.

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By Anna Raff,
Dow Jones Newswires (+7 095) 974 8055;