US energy giant ConocoPhillips has agreed to pay 1 billion yuan (US$158 million) to compensate for the damage caused by the June oil spills in Bohai Bay off northeastern China.

ConocoPhillips, which has been held accountable for the spills in the Penglai 19-3 field, and China National Offshore Oil Corp, parent of its Chinese partner in the field, have reached an agreement with China’s Ministry of Agriculture to resolve issues related to the oil spills.

The money will be paid as compensation “to settle public and private claims of potentially affected fishermen in relevant Bohai Bay communities,” ConocoPhillips said yesterday.

Chinese fishermen sued ConocoPhillips and CNOOC for losses caused by two oil spills, which started last June and polluted up to 6,200 square kilometers, an area nine times the size of Singapore, causing huge losses in the tourism and aquatic farming industries of Liaoning and Hebei provinces.

The two leaks released more than 3,000 barrels of oil and mud, used in drilling as lubricant, prompting a harsh public outcry.

ConocoPhillips is the Penglai field’s operator with a 49 percent stake, while CNOOC’s listed unit CNOOC Ltd owns 51 percent as a non-operator.

As part of the agreement reached with the Ministry of Agriculture, ConocoPhillips and CNOOC will also allocate 100 million yuan and 250 million yuan, respectively, of their previously announced environmental and ecological protection funds for natural fishery resources restoration and preservation, according to separate company statements. That funds will also support marine-related international cooperation, as well as some other public welfare projects.

The agricultural ministry said that when the compensation is paid, the provincial governments in Hebei and Liaoning will help deliver it to fishermen in “a transparent manner.”

China’s State Oceanic Administration in early September ordered the closure of the entire Penglai19-3 field after ConocoPhillips failed to contain the leaks. ConocoPhillips was deficient in management of the field and didn’t adopt necessary measures following the spills, the maritime authority said.

The closure has forced Hong Kong-listed CNOOC Ltd to revise down its annual production target.

The two oil companies didn’t say when the field could be restarted.

The Penglai 19-3 oil field is China’s largest offshore oil field, with daily production of about 160,000 barrels.

By Richard Fu