Cnooc Clears Hurdle to Restart Largest China Offshore Field

Cnooc Ltd. (883), China's biggest offshore oil and gas producer, received an initial approval to restart its largest offshore oilfield, which was shut in 2011 after an oil leak.

The National Development and Reform Commission, the country's economic planner, approved the development plan for Penglai 19-3 in December, the National Energy Administration said in a statement today on its website.

Cnooc was ordered to shut the Penglai field in September 2011 after drilling activity leaked at least 3,200 barrels of oil and fluids into North China's Bohai Bay. Cnooc and its partner ConocoPhillips (COP) have since cleaned up the spill and agreed to pay about $160 million in compensation to Chinese fishermen for losses.

"We still have to go through other regulatory approvals and meet requirements before the site can resume production," a Beijing-based spokeswoman at Cnooc said in an e-mail.

The State Oceanic Administration ordered closing the Penglai site. An approval from the agency is needed to restart production, Cnooc Chief Executive Officer Li Fanrong said in August.

Cnooc shares fell 1.9 percent to HK$16.22 at the close in Hong Kong. The benchmark Hang Seng Index declined 0.4 percent.

Penglai 19-3 produced 62,000 barrels of oil a day before it was closed. The lost production was equivalent to about 7 percent of Cnooc's targeted daily oil and gas production, according to calculations by Bloomberg.

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Cnooc's total net production rose 9 percent to 87.8 million barrels of oil equivalent in the third quarter last year because of higher overseas output and stable production from domestic wells other than Penglai 19-3, the company said on Oct. 25.

Chairman Wang Yilin said in May the company was "ready" to resume operations in Penglai, pending government approvals.

"Production at its full capacity could be achieved within six months of the restart," said Shi Yan, an analyst at UOB-Kay Hian Ltd. in Shanghai.

Cnooc received approval from the Canadian government for a $15.1 billion acquisition of Nexen Inc. (NXY), the biggest takeover by a Chinese company, in December. Cnooc said it expects to close the deal in the first quarter.