ConocoPhillips China, a local unit of Houston-based energy giant ConocoPhillips (COP), is on the verge of being sued by China’s maritime authority relating to an oil spill in China’s northern Bohai Bay.
The State Oceanic Administration, which is to file the lawsuit on behalf of the government, has reported about the oil spill at the Penglai 19-3 oilfield. The enormous spill was first noticed in June, near Platform B and C. Additionally, nine residual leaks of about 2 liters per day were revealed last week around Platform C, which are yet to be cleaned up.
Situated 375 kilometers from Beijing, Penglai 19-3 is China’s largest offshore oilfield. ConocoPhillips is the operator of the field with a 49% interest while the state-owned CNOOC Ltd. (CEO) owns the remaining 51% interest.
ConocoPhillips claimed that it has stopped the original leaks that started in June and is now concentrating on reducing the oily mud in the area surrounding Platform C. The spill had polluted about 840 square kilometers of water and hurt the country’s marine environment.
Nevertheless, the State Oceanic Administration has condemned the company, accusing it of conducting the cleanup in an incompetent manner and plans to sue ConocoPhillips for the oil leak.
A legal team of eight companies would be set up by the end of August, from within 49 Chinese law firms that have applied so far to offer legal assistance in the suit.
ConocoPhillips has begun to appraise the environmental impact of the oil spill but has not received any claims so far for the incident. However, farmers from the Hebei province have alleged the company of causing severe loss to their scallops and vegetables and are on the lookout for reimbursement. It is projected that claim compensation might surpass 100 million yuan ($15.6 million).
ConocoPhillips has a Zacks #3 Rank #3, which translates into a Hold rating for a period of one to three months. For the long term we maintain a Neutral recommendation on the company.
