Petroleum giant's image tarnished over accidents
The Bohai Bay oil spills are a black eye for operator ConocoPhillips and majority project owner China National Offshore Oil Corporation.
For CNOOC investors, the worry is the impact on the field's production - and what the spills might do to the company's image of being the most transparent of the mainland's three state-controlled oil firms.
So far, the two companies have been vague on setbacks, although Houston-based ConocoPhillips admitted last week that production at the Penglai 19-3 field dropped after crews, working on the clean-up, relieved pressure on a well.
ConocoPhillips said last Wednesday that oil seepage near platform B in the June 4 incident had been stopped, and that leakage near platform C in the June 17 incident was repaired within two days. Clean-up work was continuing, it said, without saying when it was expected to be finished or how much oil spilled.
A CNOOC spokesman said he needed to check with ConocoPhillips on whether he could disclose the impact on production.
Output from the Penglai 19-3 field was expected to rise to 69,000 barrels a day this year from 33,000 barrels a day in 2009, according to ConocoPhillips' website. CNOOC has a 51 per cent stake in the project and ConocoPhillips 49 per cent.
Gordon Kwan, head of energy research for Mirae Assets Securities, said he believed if the leakage was contained - as the companies had indicated - the lost production was likely to be minor, partly because it appeared that only one of dozens of wells leaked.
'It is a bit like the water tap ... after you make sure the leak is plugged, you can gradually turn the tap back up to where it used to be,' he said. 'Also, there are dozens of wells in an oilfield. If the pressure of one of the wells drops, the flow rate and production at other wells could rise, which may compensate for the loss.'
Kwan was a petroleum engineer with BP and ExxonMobil in the United States before becoming an equities analyst in 1997.
CNOOC's share price was spared from any sharp decline, despite negative publicity from the oil spills and the lack of timely disclosure of the incidents and their impact on production. The firms and the State Oceanic Administration disclosed the incidents more than two weeks after they occurred and only after online postings about them, believed to be written by insiders.
The delayed and passive disclosure was a departure for CNOOC, which generally has been proactive in announcing incidents affecting production. For example, it announced on April 22 that rough sea conditions caused a malfunction that shut some operations at the Bohai Bay oilfields to the tune of around 39,000 barrels a day. Previously, it announced damage to production facilities caused by typhoons.
The State Oceanic Administration last week said that under mainland law, Penglai 19-3's operator ConocoPhillips was the primary party liable for the consequences of the oil spills. CNOOC's responsibility would be determined according to the terms of its contract with ConocoPhillips.