UPDATE: ConocoPhillips Apologizes for China Oil Spill

By Judy Hua and Don Durfee | September 7, 2011

U.S. energy giant ConocoPhillips moved to repair its frayed relations with Chinese regulators on Wednesday, apologizing for an oil spill in northern China’s Bohai Bay and saying it will establish a fund to address the company’s responsibilities.

The company said the proposed fund will be designed to benefit the general environment in Bohai Bay, but it did not say how large the fund would be.

“ConocoPhillips deeply regrets these incidents and apologizes for the impact that the incidents have had on the Chinese people and the environment,” Chief Executive James Mulva said in a statement.

A ConocoPhillips subsidiary said on Tuesday that all operations at an oilfield in Bohai Bay have been shut down, as ordered by China’s marine authority.

The State Oceanic Administration (SOA) last week ordered ConocoPhillips China to halt injection, drilling and production at the Penglai 19-3 oilfield — China’s largest — because it had failed to seal leaks that have lasted for nearly three months.

ConocoPhillips owns a 49 percent stake of the oilfield and acts as the operator, while China’s top offshore oil and gas producer CNOOC has a 51 percent stake.

Major Western firms, including ConocoPhillips, Unilever and Yum Brands have lately been under increasing scrutiny from China’s state media.

ConocoPhillips has been a particular target, enduring withering criticism in the Chinese media and from regulators. On Monday, a commentary in the People’s Daily, the mouthpiece of China’s Communist Party, accused the company’s China operation of “delays, negligence, cover-ups and cheating.”

It was not immediately clear whether the apology and move to establish a fund for the bay would be enough to mollify the company’s critics.

A ConocoPhillips spokesperson could not be reached for immediate comment.

According to a statement posted on CNOOC’s website, the Chinese company’s chairman met last week with ConocoPhillips to express its willingness to cooperate on a Bohai Bay fund.

ConocoPhillips China will seek to work with Chinese authorities and CNOOC regarding the establishment and operation of the fund, the company said in the statement.

The Penglai 19-3 oilfield is the country’s largest offshore oilfield, with total output of 8.4 million tons per year (168,000 bpd), about 20 percent of total crude oil production in Bohai Bay.

CNOOC has said it would lose 62,000 barrels per day of output because of the suspension at China’s biggest offshore oil field.

It had already been losing 22,000 bpd since the regulator ordered a halt to operations at two PL19-3 platforms on July 13 because of the leaks. CNOOC’s Hong Kong listed shares were trading 2.9 percent higher in early afternoon on Wednesday, after having fallen more than 10 percent following news of the output suspension.

The oilfield was producing 150,000 bpd before the oil leak, Standard Chartered Bank said in a research note on Monday.

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