The Chinese Oil Spill

It took a month to admit that there was an oil spill in China’s Bohai Bay, from June 4 when it happened to July 5 when The Global Times, in an unusual reaction from a presumably government controlled newspaper, wrote “We cannot help but wonder: is the SOA (the State Oceanic Administration) a serious watchdog that exists to prevent bigger incidents from happening, or a loving parent who is over-protective of his own child?”

In China, one must not just read between the lines. An entire psychology must be surmised and nothing is left to chance. When a government newspaper criticizes the government it is quite a feat. There are no newspapers in China that do not belong to the government. China may have liberalized anything and the Chinese can enjoy many things including things that they could not legally find in the West but not a free press.

The object of wrath, which since then has echoed in many other news media, has been first the oilfield operator, ConocoPhillips but, even more pointedly, has been the leaseholder, CNOOC, China’s major offshore oil company.

The actual spill is probably minor, maybe 1500 barrels total. No BP well in sight here with millions of barrels leaking into the water. The geological characteristics of Bohai Bay oil reservoirs do not come close to the flow capacity of Gulf of Mexico wells. But both ConocoPhillips and CNOOC did not resist the temptation to say as little as possible, not a cover up by any means, but certainly not volunteering to gush out the information. They also did not shy away from downplaying the event. On July 5 it was admitted to be only 800 km. Ten days later it became four time as big, “four time the size of Singapore” (no idea why the comparison) “but not serious”. Then, the SOA asked ConocoPhillips to shut down two of its platforms, while it would investigate.

The Chinese blogosphere got saturated with the event. It is the only really free press of the country and it is often quite lively but, as anywhere, it is hard to distinguish sometime between reality and fantasy. But there is constantly a tone of doubting government pronouncements which always seeks to maintain social order.

The spill provided the impetus to show environmental stewardship and concern. China is suffering from all sorts of pollution disasters. When huge companies are caught polluting they become a lightning rod for a public that has seen environmental blight daily. More than 80 percent of the country has no access to public drinkable water. Millions of Chinese kids grow up in urban areas never seeing blue sky or clouds. The entire air is a giant smog. Fifteen of the world’s 20 more polluted cities are in China. The list goes on.

The official press reaction is probably intended to show that the government is becoming sensitive to accusations of collusion, of turning the other eye to corporate mischief.

The Chinese national oil companies (CNOOC, Sinopec and CNPC) have a very cozy relationship with the government. They are certainly not subjected to much of a competition in importing crude and in marketing oil products and natural gas. There is nothing close to antitrust in the Chinese energy scene.

The NOCs are carrying the Chinese flag all over the world and they perform an obvious national function, securing energy which the Chinese government has explicitly and, rightfully so, recognized as an essential element in its economic growth.

International oil companies, operating in China, provide the necessary technology admired by the Chinese. They definitely look up to their American counterparts. Understandably, IOC’s could become less vigilant when cooperating with Chinese NOCs which enjoy such chummy relationship with the government.

It remains to be seen if this Bohai incident may alter the practices of oil production in China and, especially, if it will increase the oversight by the government in domestic operations. However, the international role of the Chinese oil companies is so crucial to the country’s future and self-image that it is almost certain that they will continue to be treated as modern day princes.

Energy Tribune