US oil major ConocoPhillips (COP - Free Report) has received the consent from the State Oceanic Administration (SOA) to start oil production at the Penglai 19-3 oilfield, off China's Northeastern coast.
ConocoPhillips’ development plan and its environmental impact assessment have been approved by the SOA and the company can gradually commence operations. However, the regulator will keep a check on the resumption activities in the area.
In January, the company received a go-ahead signal from the Chinese government's top economic planning agency – National Energy Administration (NEA) – for the revised development plan for the oil field in Block 11/05.
Situated 375 kilometers from Beijing, Penglai 19-3 is China’s largest offshore oilfield. Penglai 19-3 is operated by a Chinese affiliate of the U.S. oil major ConocoPhillips with a 49% stake. The field was jointly developed by CNOOC Ltd. (CEO - Free Report) , which holds the remaining 51% interest.
The statement issued by the SOA compels ConocoPhillips to rigorously execute the requirements of the environmental assessment. CNOOC is also required to help its partner in meeting the requirements.
In 2011, a subsidiary of the U.S. oil major ConocoPhillips had experienced 2 oil spills in Penglai 19-3 that leaked about 3,200 barrels of oil. The leakage polluted the water and caused environmental damage. As per the mandate of the SOA, both ConocoPhillips and CNOOC were asked to stop production at the field since the agency found the clean-up act to be slow. Both the companies have agreed to pay $160 million to recompense for the incident.
Both, ConocoPhillips and CNOOC, hold a Zacks Rank #3, which is equivalent to a short-term Hold rating. However, other stocks in the oil and gas sector like Cabot Oil & Gas Corporation (COG - Free Report) and Memorial Production Partners L.P. , hold a Zacks Rank #1 (Strong Buy) and are expected to perform better.