CNOOC's headquarters in Beijing. (Photo/CFP)
US investors this month filed a class-action lawsuit against China National Offshore Oil Corp (CNOOC) for failing to reveal information regarding the oil spills at its Penglai 19-3 oilfield in June last year in a timely manner and playing down the damage that the leaks did to the company's business performance.
The oilfield in northern China's Bohai Gulf operated by CNOOC and the China division of US oil company ConocoPhillips.
The lawsuit comes at a sensitive time as CNOOC has been negotiating with the US government to acquire Canadian oil producer Nexen, which has 10% of its assets in the United States, according to Economic Information, a financial newspaper published by China's state-run newswire Xinhua.
Investor Sam Sinay filed the lawsuit, individually and on behalf of other investors, against the company and its CFO Zhong Hua and CEO Yang Hua at the district court in the southern district of New York on Oct. 11, according to Chinese tabloid Global Times. He accused CNOOC of misleading investors about its performance from Jan. 27 to Sept. 16 last year.
Massive oil spills occurred at the Penghai oilfield 19-3 on June 4 and again on June 17 last year, affecting over 5,000 square kilometers of water, causing major environmental damage and economic losses to local fishermen. The leak was not made public however until July 5. The share price of CNOOC plunged to US$9.39 in the US after the Chinese company confirmed it would suspend production at its offshore oilfields and establish a fund with ConocoPhillips to clean up the spill and pay compensation. The share price dropped further by US$6.85 after the two firms announced the second fund, according to Economic Information.
As of the first half of this year, CNOOC's production output has been reduced by 4.6%, or 1.6 million barrels of oil year-on-year due to maintenance, suspension of the Penghai oilfield and the company selling its interests in an Indonesian production contract.
Sinay and other investors assert that the Chinese side failed to follow environmental regulations, covered up the oil leak and did not include the damage in its auditing. It also wrongfully claimed that it was a "non-operator" of the oilfield while shouldering the responsibility to clean up the leak. Sinay and the investors said CNOOC violated the US federal securities law and requested the firm compensate them for their economic losses, according to Economic Information.
If the investors win their suit, CNOOC could face a further compensation payout of at least US$100 million or more. Such lawsuits against the company began as early as March this year, when US law firm Faruqi & Faruqi encouraged shareholders who purchased CNOOC stock between Jan. 27 and Sept. 16 last year to contact them to discuss their legal rights.
References:
China National Offshore Oil Corp 中國海洋石油
Zhong Hua 鐘華
Yang Hua 楊華