Sakhalin Energy Cooperation Commitment with Ministry of Natural Resources

Sakhalin Energy CEO Ian Craig sent a letter today to Minister Yuri Trutnev of the Ministry for Natural Resources of the Russian Federation. In his letter the company's CEO re-affirmed Sakhalin Energy's commitment to cooperate with the Ministry for Natural Resources and Rosprirodnadzor in a constructive dialogue, and informed the Minister of the company's work to rectify acknowledged non-compliant environmental practices identified during the Rosprirodnadzor August 2006 pipeline inspections.

Noting that the onshore pipeline construction is being carried out in a challenging physical and geographic environment, Ian Craig described the Company's work to rectify the non-compliances. Based on the results of the Makarov area inspection in August by Rosprirodnadzor, as well as Sakhalin Energy's own inspections and controls on its contractors, the Company temporarily suspended construction activities at this pipeline section. In cooperation with Russian authorities, the Company promptly developed and implemented a focused corrective action program.

The CEO advised the Minister that, as of October 16th, the Company's contractors had achieved over 98% completion of the remedial program in the Makarov area. Rosprirodnadzor has been invited to jointly re-inspect the area with the Company.

Mr. Craig gave his assurance that the Company will respond quickly and adequately to correct any more non-conformances that may be identified by the further Rosprirodnadzor inspection that started on October 3rd. He assured the Minister that the Company would treat any findings of the MNR and Rosprirodnadzor with the highest priority.

He said that the Company was further strengthening controls and oversight of contractors and subcontractors executing the pipeline construction.

The Company looks forward to the opportunity to present a comprehensive action plan to remediate all identified non-compliances to Minister Trutnev next week.

Sakhalin Energy will work with Rosprirodnadzor and MNR to ensure that the economic development of Sakhalin Island goes hand in hand with the preservation of this unique and diverse ecological system.


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