Royal Dutch Shell representatives met with top Gazprom officials and the Russian energy minister earlier in the week, the energy giant's board chairman, Dmitry Medvedev, said Tuesday.
"Working consultations and negotiations on Gazprom's possible involvement in the project are in progress," minister Viktor Khristenko told parliament.
Medvedev, who is also first deputy prime minister, said Tuesday the sides were close to an agreement on Gazprom's participation in Sakhalin II, and added that the company was considering all possibilities for joining the project, including investment or an asset swap.
The two companies confirmed that Shell CEO Jeroen van der Veer had met Gazprom's head Alexei Miller in Moscow on Friday but declined to give details on the negotiations.
Shell's doubling of its cost estimate has infuriated Russian authorities and scuppered a previous agreement on an asset swap, which would have given Gazprom a 25% stake in Sakhalin II. Industry insiders now expect the Russian energy giant to gain a controlling stake in the project.
The current negotiations follow months of intense pressure from Russian authorities accusing the project operator Sakhalin Energy, in which Shell holds 55%, of inflicting serious environmental damage to Sakhalin Island, including deforestation, toxic waste dumping and soil erosion.
In September, the Russian Natural Resources Ministry canceled its 2003 environmental approval of Sakhalin II. Russia's environmental watchdog said Tuesday that court proceedings on compensation for environmental damage would most likely begin in March 2007.
The minority owners of Sakhalin Energy are Japan's Mitsui with 25%, and Mitsubishi with 20%. Much of the liquefied natural gas from the project will be exported to Japan, which is seeking to diversify its energy imports.
In view of Gazprom's slated involvement, Japan's economics minister demanded guarantees Tuesday that his country would receive oil and gas from the Sakhalin II project on schedule.
Energy Minister Khristenko said Gazprom would face the same requirements as other investors should it join Sakhalin II, operated under a production sharing agreement with the Russian government signed in 1994.
"If Gazprom joins other participants in the project, it will have to follow all the obligations of the agreement, including the requirements of environmental protection legislation, just like all other investors," he said.
Sakhalin II comprises an oil field with associated gas, a natural gas field with associated condensate production, a pipeline, a liquefied natural gas plant, and an LNG export terminal.
