Russian gas behemoth OAO Gazprom is close to a deal with Royal Dutch Shell PLC on the terms for Gazprom's entry into the Sakhalin-2 oil and gas project, the company's chairman said Tuesday.

Regulators have stepped up scrutiny of the project -- the largest single foreign investment in Russia -- in a campaign that is widely seen as part of Kremlin efforts to tighten its grip on Russia's vast oil and gas assets.

On Friday, Shell made a number of proposals to Gazprom, which analysts said could herald a deal putting the gas giant in control of the project, on the Pacific island of Sakhalin.

Dmitry Medvedev, who serves simultaneously as Gazprom chairman and deputy prime minister, told reporters on Tuesday that the company could be satisfied with less than a 50 percent stake in Sakhalin-2.

"The size of the stake is an important question but not a critical one," Medvedev said.

Signaling that difficult talks were still under way, Industry and Energy Minister Viktor Khristenko said later Tuesday it was "too early" to talk about an agreement between Shell and Gazprom.

Sakhalin-2 -- whose shareholders also include Japan's Mitsui and Mitsubishi -- is currently producing crude oil and plans to begin exporting liquefied natural gas in mid-2008.

It also is the only major oil and gas project under development in Russia that does not have a Russian shareholder -- a fact, observers say, that has left it vulnerable to pressure from the Kremlin.

Shell enraged the Kremlin last year when it announced that the cost of the project would double to US$22 billion (euro17 billion): Under the terms of the so-called production sharing agreements signed in the 1990s, the Russian government sees revenues from the Sakhalin-2 project only when its costs have been covered.

Khristenko reaffirmed Tuesday that the government wouldn't accept a doubling of the project's costs. He said at a news conference that the Cabinet would like to see the project's budget approved in the first quarter of next year.

Earlier Tuesday, Oleg Mitvol, of the state environmental watchdog Rosprirodnadzor, said Sakhalin-2 had caused environmental damages worth US$10 billion (euro7.6 billion), news agencies reported.

He said a final evaluation of the damages would be completed by fall next year and that he planned to sue the company in Russia and in the Arbitration Institute of the Stockholm Chamber of Commerce, which settles such disputes.

"I think we will be ready to start the court process by the start of March," Mitvol was quoted as saying by the RIA-Novosti agency.

Mitvol and other Russian officials say that a Shell-led consortium developing the giant energy project on the Pacific island of Sakhalin has silted rivers and felled trees illegally.

Representatives for the consortium, Sakhalin Energy, were not immediately available to comment.

Mitvol also said he planned to begin an inspection of the Sakhalin-1 project, which is 30 percent-owned by Exxon Mobil Corp.