Oil Spill Compensation Earmarked

March 29th, 2012 | Economic Observer

Summary: Details have emerged about how the 1.35 billion yuan settlement recently agreed to with ConocoPhillips and CNOOC will be divided up between regions.

Two months after it was announced that China’s Ministry of Agriculture had reached an agreement with U.S. oil major ConocoPhillips and the China National Offshore Oil Corp. (CNOOC) in relation to compensation for the environmental damage caused by last year’s Bohai Bay spill, the EO has learned more details of how the compensation scheme will operate.

According to the details of the package that was announced in late January, a total of RMB 1 billion yuan will be paid as compensation to settle public and private claims of potentially affected fishermen.

The EO has learned that Liaoning Province will receive more than 300 million yuan of the funds and that two counties in Hebei province – Laoting and Changli – will also receive more than 300 million yuan each.

This information was confirmed by Qi Yuxiang (齐玉祥), an official in Laoting county.

Several government departments in Laoting are conducting further investigation into the losses suffered by the local fishing industry and are expected to report their findings at the end of April.

After that, the government will be ready to begin the process of dividing up the one billion yuan that ConocoPhillips has agreed to pay.

After last June’s leaks from ConocoPhillips’s Penglai 19-3 oilfield in the Bohai Bay, the company didn’t halt production across the field until it had received an order from the State Oceanic Administration (SOA) and didn’t set up a compensation fund until Sep 6 last year.

It announced the launch of a second environmental fund on Sept 18.

On Jan 24, ConocoPhillips, China National Offshore Oil Corp (CNOOC), the Ministry of Agriculture and the affected provinces agreed on a total package of 1.35 billion yuan, with ConocoPhillips contributing 1.1 billion yuan.

In addition to the 1 billion yuan in compensation, ConocoPhillips will put forward 100 million yuan from their previously announced environmental funds for the restoration, maintenance, environmental monitoring and scientific research of fishery resources. According to the agreement, CNOOC will also contribute 250 million yuan to this fund.

One lawyer, Zhao Jingwei (赵京慰), who represents 107 fishermen from Laoting county, said that the Ministry of Agriculture shouldn’t be playing the role of mediator without the

fishermen’s consent. Mr. Zhao said that there are concerns about the way that the current settlement was calculated and complained that his clients didn’t understand the details of how the procedure for agreeing to mediation worked.

Zhao contacted the Ministry of Agriculture on Feb 6 to ask for details of how the compensation sum had been agreed on and how the funds will be allocated.

The ministry answered on March 20, saying that Hebei and Liaoning provinces were conducting door-to-door enquiries in relation to losses and that the compensation would be distributed to those who are willing to accept the mediation process.

Zhao was advised to contact the relevant departments if he wanted information on those enquiries.

The ministry said that the fishermen’s losses had been calculated by experts in fishery, environmental protection and other fields. These experts were said to have looked at regional fishery statistics from recent years and also according to a monitoring of the “oil spill pollution situation.”

The ministry’s reply didn’t explain how the decision to how much to award each region had been made.

In a series of oil spills that began on June 4, 2011, 3,300 barrels of oil and drilling mud leaked into the Bohai Bay off north east China.

The spill was not publicly disclosed until a month after it began and exposed many loopholes in the ability of Chinese supervisory bodies to regulate offshore drilling.

By Jiang Yunzhang (降蕴彰)

Translated by Zhu Na

Category: China Oil Monitor