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CNOOC halts oil production

By Wang Qian  (China Daily)

11:10, September 06, 2011

BEIJING - Following the full suspension of drilling operations on Sunday at its Penglai 19-3 oilfield, China National Offshore Oil Corp (CNOOC) said it will lose 62,000 barrels a day of oil production.

CNOOC released the comment on Sunday after the State Oceanic Administration (SOA) on Friday ordered all production halted at the oilfield in Bohai Bay, which is operated by ConocoPhillips, which holds a 49-percent stake. The remainder is held by CNOOC.

"We respect the decision made by the SOA. As non-operator of the oilfield, we will continue to cooperate with ConocoPhillips China to execute the orders and to release information on the progress in a timely manner," the company said.

Operation of two leaking platforms has been halted since July 13, cutting 22,000 barrels in net production per day. Now the full suspension of the field has further reduced the company's net production by around 40,000 barrels per day, according to the statement.

But the field's operator, ConocoPhillips China, didn't mention the production losses in its latest response on Monday, only revealing in a previous statement that the shutdown will have an impact on production from the field, which averaged 56,000 net barrels of crude oil per day in 2010.

According to ConocoPhillips China's statement on Monday, the company is complying with the suspension order and as of 8 pm on Sunday the company had fully stopped drilling and production at all 231 wells in the oilfield.

Work to suspend operations began on Sept 2 and the US energy giant has been working to have the suspension proceed in a safe and timely manner to preserve the field's operating integrity.

No seepages or oil sheens have been observed at Platform B and divers cleaned up 1.2 cubic meters of oily mud in the seabed under Platform C on Sunday, the company said.

The statement said the company is working with its co-venturer in the oilfield, CNOOC, to develop a plan for reducing reservoir pressure to ensure safety of the field and protect the reservoir, consistent with the requirements of the SOA.

CNOOC has arranged for an expert review of the plan to be conducted on Tuesday and Thursday this week, according to the statement.

A new marine environmental impact report for submission to the SOA is being prepared, the company said.

The SOA said it won't end the suspension until it has approved the report.

While the SOA said the incident is due to human error, ConocoPhillips said it was committed to complying with the law and conducting "all business activities with the highest ethical standards."

The spills began in June and last week led to a SOA order to halt all production in the affected Penglai 19-3 oilfield.

The ongoing incident has polluted at least 5,500 square kilometers of seawater in Bohai Bay and spills reached Liaoning and Hebei provinces surrounding the bay, according to the monitoring result from the North China Sea Branch under the SOA.

Besides facing unknown production losses and criticism from the public for its slow action and bad attitude, ConocoPhillips China may face several lawsuits over environmental impact and economic losses from the SOA and affected fishermen.

The SOA is busy preparing its lawsuit against ConocoPhillips China for compensation and is ready for "a long-lasting battle", an insider with the legal consultant team for the SOA told China Daily.

Zhang Pengfei, deputy chief of legal website pil.org.cn, told China Daily that lawyers from Beijing ICS Law Firm will go to the affected Changli county in Hebei province on Wednesday to prepare the lawsuit against ConocoPhillips China for fishermen's economic losses.

On Friday, more than 30 lawyers representing the fishermen applied to the SOA for the details of the investigation and will start a lawsuit after getting the report.

ConocoPhillips China faces a fine up to 200,000 yuan ($31,000) for the leak according to the law, but much more will be paid in compensation for ecological and economic damage.

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