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Clean Error: Conoco sets up fund amid Chinese backlash

by David Vranicar 07 Sep 2011
Clean Error: Conoco sets up fund amid Chinese backlash

Image Credit: © ConocoPhillips Company

Following a June oil spill off the coast of China - a spill that drew the ire of Chinese officials - ConocoPhillips announced Wednesday that it has set up a fund to offset the damage.

The spill, which occurred in the Bohai Sea east of Beijing, is believed to have begun on June 4. While ConocoPhillips claims the leak was contained by an Aug. 31 deadline, Chinese authorities say that it continued into September.

Estimates are that about 700 barrels of oil and 2,500 barrels of drilling mud leaked into the sea. The oil field is one of China's largest. It is co-owned by ConocoPhillips and Cnooc, a Chinese offshore oil producer, and operated ConocoPhillips.

oil spill

Image Credit: Oil Spill © Michael Darcy Brown

China's response to the spill has been harsh, especially compared to a 2010 spill at a refinery in the eastern city of Dalian, not far from the recent spill.

According to the Financial Times, no companies were fined or sued for that incident. This time around, however, Chinese regulators have ordered each of the seven drilling platforms in question be shut down until Conoco submits a plan that receives approval from the authorities. And this despite only two of the seven platforms having reported leaks.

In addition, an article in the state-run People's Daily cited legal experts who said the government should file criminal charges against Conoco.

rainforest deforestation.

Image Credit: Big Oil Business © Rolffimages

Laban Yu, and energy analyst at the investment bank Jeffries, told the Financial Times, "They are going to make an example out of them," he adds. "They are saying foreign companies have problems just like our own."

Oil spill or no, Chinese oil companies have experienced a 2011 windfall. In August, despite the June spill, Cnoon reported a first-half net profit of roughly $6.2 billion, up 51.4 percent. Sinopec, the county's second largest oil refiner, announced profits of roughly $6.4 billion.

Still, despite the booming oil industry, and despite China being the biggest energy-consuming nation in the world, Chinese regulators have "thrown the book at ConocoPhillips," according to Yu.

Lin Boqiang, a professor of energy economics at Xiamen University, told the Financial Times that this is part of a larger trend in China "All developing countries go through a process of paying more and more attention to the environment. The laws and regulations for environmental protection are constantly getting stronger, so you can't compare a spill that happens today to something that happened a year ago."

Indeed, China has been citing the environment more and more in recent months. Jiang Kejun, the head of China's energy and environmental policy agency, recently went to Australia and praised an emissions-trading agreement between the two nations. China also invoked environmental concerns to justify its export restrictions on certain raw materials.

Clean Error is an Earth Times blog that looks at China's position as both the world's biggest polluter and fastest-growing manufacturer of green technology. The views and opinions expressed in this article are those of the author.


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