April 27, 2012 4:02 pm

China issues $269m fine for oil spill

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China has issued its biggest fine for oil spill pollution, asking for Rmb1.7bn ($269m) from ConocoPhillips and Cnooc in compensation for environmental damage caused by oil seepage from their well in the Bohai Bay.

Lax environmental standards in the world’s second-largest economy have left China with chronic pollution and the Bohai Bay spill last summer was the first time Chinese authorities had publicly tackled an oil spill from an offshore well in Chinese waters.

The spill was very small relative to big oil spills such as Deepwater Horizon but served as a milestone for maritime authorities determined to prove their mettle following the Gulf of Mexico spill.

Regulators required a total shutdown of all wells on the block where the spill occurred, and ConocoPhillips and Cnooc have submitted a fresh proposal for developing the block that is still awaiting government approval.

Under Friday’s agreement, ConocoPhillips will pay Rmb1.1bn to resolve environmental claims related to the spill, and a further Rmb113m to support environmental initiatives in Bohai Bay. ConocoPhillips was the operator of the wells when the spills occurred. Cnooc, Conoco’s partner with a 51 per cent stake in the block, will pay Rmb480m to support environmental initiatives in Bohai Bay.

The Bohai Bay is heavily polluted by industrial run-off from Beijing and Tianjin, and the deterioration of the bay has been a growing source of concern for Chinese leaders.

Oil analyst Gordon Kwan of Mirae Asset Securities said Chinese regulators were taking offshore oil pollution more seriously following the Deepwater Horizon incident.

“They don’t want that disaster to be repeated in China,” Mr Kwan said. “China is becoming a first-world country and they realise that aggressive production of energy cannot come at the cost of the environment.”

China’s State Oceanic Administration said on Friday that “significant progress” had been made in oil spill compensation. The agency added that money from the fines would be used for purposes including ecological construction, environmental protection, restoring damaged marine life and monitoring the impact of the oil spill in Bohai Bay.

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