ConocoPhillips Fined By Chinese Government For Oil Spill

Houston-based ConocoPhillips and China National Offshore Oil Corporation have agreed to pay 1 billion Chinese yuan, or around $159 million, to settle compensation claims resulting from oil spills in Bohai Bay, off northeastern China. Center staff visited the Bohai Bay area in 2007.

The two companies had reached an agreement with China's Ministry of Agriculture related to the June 2011 incidents at the oil field, known as Peng Lai 19-3.  The leaks, although tiny compared with BP PLC's 2010 Gulf of Mexico disaster, provoked a storm of media protests in China and harsh criticism by the authorities of the Bohai field operator, Conoco.  The Chinese government in early September ordered a complete halt in production at the field, which produced an average 56,000 barrels a day in 2010. It is still offline.

Conoco said the compensation money would be used to "settle public and private claims of potentially affected fishermen in relevant Bohai Bay communities.

In two accidents in June, 3,343 barrels of oil and mud used in drilling leaked through the seafloor near platforms at the field, operated by Conoco and 51% owned by Cnooc's listed unit Cnooc Ltd. In November, China's State Oceanic Administration charged that "Conoco was deficient in management of the field and didn't adopt the necessary measures after the spill, all of which caused a larger oil spill because of its negligence."

In December, Conoco Chairman and Chief Executive Jim Mulva said that his company expected to pay "reasonable compensation" and that a fund it had set up "can help address the challenges of those who have been affected and promote the environmental sustainability of Bohai Bay." In its Wednesday statement, Conoco said it also is allocating approximately $16 million of that fund to improve fishery resources in the area. (WSJ, 1/25/2012)