ConocoPhillips (COP) announced that its unit in China was granted approval by the State Oceanic Administration (SOA) for the resumption of partial operations in Penglai oilfield, in north east China's Bohai Bay.
In June, a subsidiary of the U.S. oil major had experienced an oil spill in the Penglai 19-3 oilfield that caused environmental damage and polluted approximately 840 square kilometers of water.
Following the incident, the SOA had ordered ConocoPhillips to stop production at platform B and C of the Penglai 19-3 oilfield since July 13, owing to the slow process of cleaning up activities. The shutdown was expected to shrink production of about 17,000 barrels of oil per day for ConocoPhillips. China's maritime authorities have filed a lawsuit seeking compensation from the parties responsible for the Bohai Bay oil spill.
As of now, the company has gained permit in 14 production and water injection wells on platform B that will ultimately help to arrest the leakage in the oilfield. Till date, the U.S. oil major has recovered 2,126 barrels of oil-based mud from the Penglai 19-3 C platform neighborhood, and expects to conclude the cleanup operation by August end.
Penglai 19-3 oilfield ––China's biggest offshore oilfield –– is operated by a Chinese affiliate of ConocoPhillips with a 49% stake. The field was jointly developed by the country’s dominant producer of offshore crude oil and natural gas, CNOOC Ltd. (CEO), which holds the remaining 51% interest.
ConocoPhillips is a major globally integrated oil company engaged in the exploration and production of oil and natural gas, refining and marketing of petroleum products, manufacturing of chemicals, and other energy-related businesses. With leading positions in both natural gas and heavy crude oil in North America, as well as a legacy position in the North Sea and growing exposure to lucrative international regions, ConocoPhillips expects to replace reserves and sustain production growth over the long term.
However, considering the company’s sensitivity to changes in crude oil price, geopolitical risks associated with international operations and challenges, we prefer to stay on the sidelines at this moment.
We maintain our Neutral rating on the stock for the long term. ConocoPhillips has a Zacks #3 Rank, which is equivalent to a Hold rating for a period of one to three months.
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