China Sets Fines For Bohai Oil Spill

China has ordered oil giant ConocoPhillips and China National Offshore Oil Corp. to pay $269 million for oil spills at a Bohai Bay oilfield run by Conoco.

The first of two leaks was detected last June at Penglai 19-3, China's biggest offshore oilfield, jointly owned by the two companies. Houston's ConocoPhillips has a 49 percent stake and CNOOC holds the other 51 percent.

The leaks released more than 700 barrels of crude oil into the water, resulting in marine pollution and environmental damage to a marine area of 2,400 square miles, says China's State Oceanic Administration.

SOA said Friday the $269 million would be used for environmental protection efforts in Bohai Bay, including habitat restoration, reducing the discharge of oil pollutants and monitoring and research on the impact of oil spills on the environment, state-run news agency Xinhua reports.

Last September, SOA ordered ConocoPhillips to suspend operation of the oilfield.

Since the 2010 Deepwater Horizon disaster in the Gulf of Mexico, Chinese regulators are taking a more serious approach to offshore oil pollution, says oil analyst Gordon Kwan of Mirae Asset Securities.

"They don't want that disaster to be repeated in China," Kwan told the Financial Times.

"China is becoming a first-world country and they realize that aggressive production of energy cannot come at the cost of the environment."

For its share, ConocoPhillips will pay $191 million of the $269 million fine.

That's in addition to the approximate $160 million ConocoPhillips, in a January agreement with China's Ministry of Agriculture, said it would pay for compensation to fishermen.

The latest fine "is higher than expected," said Lin Boqiang, director of the China Center for Energy Economic Research at Xiamen University, China Daily newspaper reports.

"But it's not a matter of capital. More importantly, it's a turning point for the oil producers that they will pay if they leave environmental protection behind in pursuit of profit."

In announcing its first quarter 2012 financial results last week, CNOOC said the company's net production had fallen 6.3 percent year-on-year, to 79.8 million barrels of oil equivalent, which it said was mainly due to the suspension of production at the Penglai 19-3 oilfield.

Bernstein Research said earlier this month that it expected full production to be restored at Penglai 19-3 "imminently," Platts news service reports.

The oilfield restarted last month under an "approved interim reservoir management plan," ConocoPhillips said April 5, with gross production at 40,000 barrels per day. Before last September's shutdown, it was producing 122,000 barrels per day.