ConocoPhillips to create fund for Penglai 19-3 oil spills in Bohai Bay

Singapore (Platts)--7Sep2011/151 am EDT/551 GMT

ConocoPhillips said late Tuesday that it will establish a fund to address its "responsibilities" related to the oil spills at Penglai 19-3 oil field in China's Bohai Bay.

The fund will be designed to meet the company's responsibilities "in accordance with relevant laws of China and to benefit the general environment in Bohai Bay," ConocoPhillips said in its statement.

The oil major's local unit, ConocoPhillips China, will seek to work with the authorities and its partner in the field, China National Offshore Oil Corp., regarding the establishment and operation of the fund, it said.

"ConocoPhillips deeply regrets these incidents and apologizes for the impact that the incidents have had on the Chinese people and the environment," said ConocoPhillips Chairman and CEO James J. Mulva, in the statement.

A ConocoPhillips spokesman said the company was still working out details of the fund, such as how much it would be, how payments would be made and who would be paid. CNOOC had said on Saturday that it was also considering setting up a compensation fund to pay for damages.

ConocoPhillips is the operator of the field with a 49% interest, while CNOOC holds the majority 51% stake.

China's State Oceanic Administration ordered complete shutdown of the Penglai 19-3 field late last week, and also said it will make claims against the US oil company for damage to the marine environment due to the spills, CNOOC said over the weekend.

In a statement to the Hong Kong stock exchange by CNOOC on Sunday, SOA said on its website that its Joint Investigative Team had determined that ConocoPhillips had not fulfilled "its duties as a reasonable and prudent operator."

According to CNOOC, SOA said last Friday that ConocoPhillips China "as the operator of Penglai 19-3 oil field has neither completely screened out the oil spill risks nor completely sealed the sources of oil spillage."

Two separate oil leaks were discovered at the Penglai 19-3 oil field in Bohai Bay, on June 4 at platform B; and on June 17 at platform C. Operations at both platforms were subsequently suspended by the SOA on July 13.

According to an earlier estimate by ConocoPhillips, total production from the two platforms is approximately 47,000 b/d, which accounted for a third of the production from the entire Penglai 19-3 field.

Since the order from the SOA to shut down the entire field, ConocoPhillips said it had stopped all 19-3 drilling, water injection and production operations as of 8 pm Sunday (1200 GMT).

"Operations are currently stopped at 181 producing wells and 54 injecting wells, for a total of 235 wells," it said.

ConocoPhillips China also said on its website that the aggregate amount of oil and oil-based drilling fluids from the two spills totals about 3,200 barrels.

--Thomas Hogue, thomas_hogue@platts.com

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