Offshore oil rules may be overhauled

Updated: 2011-11-07 06:54

By Zhou Yan and Wang Qian (China Daily)

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BEIJING - The government may revise regulations covering joint offshore oil exploration with foreign companies following a spill off the northeastern coast at a field operated by ConocoPhillips China, sources said.

The proposed revision is being led by the Ministry of Land and Resources (MLR) and aims to strengthen government oversight of offshore oil and gas exploration involving foreign enterprises, according to a source who requested anonymity.

The source said that the revised amendments to the regulations would nail down regulator responsibility, especially for the MLR, the National Energy Administration, the General Administration of Quality Supervision, Inspection and Quarantine, the Ministry of Environmental Protection and the State Oceanic Administration. Detailed penalties for environmental damage caused by companies and violations of other rules would also be covered.

A senior official from the MLR, who also declined to be named, confirmed to China Daily that the amendments are under discussion among officials and experts, and may be sent to the State Council this year. He did not disclose any further details.

Amendments to the regulations, which were introduced in 1982, have been carried out before, in 2001 and 2011. But these could be the most comprehensive changes.

Under existing rules, China National Offshore Oil Corp (CNOOC) is authorized by the government as the exclusive entity to carry out domestic offshore oil exploration activities with foreign companies.

The regulations currently are not specific on obligations and responsibilities concerning the government and companies, particularly when accidents occur.

The recent oil spill has exposed shortcomings of regulators and the inadequate punishment for those responsible, said Feng Fei, director of the industry department at the State Council's Development Research Center.

"The supervisory capabilities of related regulators should urgently be raised," he said, suggesting that amendments should seek greater insight into just how experienced various companies are in offshore drilling.

Chen Bi, executive vice-president of CNOOC, said earlier that he did not know about the possible amendments. But he added that the spill in June will make the company consider reviewing the cooperation model with foreign companies.

CNOOC holds a 51 percent stake of the Penglai 19-3 oilfield off Bohai Bay. More than 3,300 barrels of oil spilled from this field.

ConocoPhillips China, a subsidiary of the Houston-based energy company ConocoPhillips, holds the remaining 49 percent and operates the production base.

The field is the biggest offshore oilfield so far discovered in China with estimated recoverable reserves of about 500 million tons. "The incidents have caused very negative effects on both the environment and society," Chen said.

More stricter regulations, both in terms of safety and environmental protection, will be introduced, he said.

Donna Xue, spokeswoman for ConocoPhillips China, refused to comment on the proposed revisions but said that the company is not familiar with possible regulatory amendments.

The June spill was widely considered by industry experts as a catalyst to propel the government to review existing regulations introduced when China was short of capital and technology.

Offshore oil exploration has been going on for about 30 years and revisions are inevitable, a senior researcher from China National Petroleum Corp, the country's biggest oil and gas producer, said, on condition of anonymity due to the sensitivity of the issue. "The spill is a stimulus to the revisions," he said.

In addition, Feng also questioned the exclusive rights of CNOOC in the offshore oilfield by saying that the country should let more Chinese companies participate in joint exploration activities. Competition may help boost the industry to develop in a much healthier way, he said.