China Copes With Spill of Its Own

NEW YORK (TheStreet) -- A day after BP (BP) announced it had capped the leak in the Gulf of Mexico, around 1,500 tons of crude oil spilled into China's Yellow Sea after two pipelines exploded in China National Petroleum Corp.'s facility near Xingang Harbor, off the port of Dalian.

Although the cause of the Dalian explosion is yet to be ascertained, CNPC looks well set to weather its costs.

The magnitude of both disasters is vastly different. Until now, the cost of the spill in the Gulf of Mexico is estimated at $4 billion, according to BP. The company has also agreed to commit $20 billion towards damages and cleanup operations.

On the other hand, analysts estimate the total spill cost for CNPC at $50 million. China expects full cleanup before July 24, with nearly 50% of the slick cleaned up as of July 21. The BP spill has just been capped, but concerns about leakage remain.

The explosion in China caused a total 1,500 tons of oil to spill into the sea. On the other hand, BP's well discharged 8,220 tons of crude per day from April 20, the day the rig exploded, until July 15, when it was capped.

The response time of each company has varied. Close to one month after the spill in May, BP had yet to deploy its cleanup boats fully, drawing much criticism. In contrast, CNPC's reaction was swift, and rescue efforts were mobilized within hours. This is despite the appalling disaster-management reputation China's oil companies have.

PetroChina Company Limited ( PTR), the listed arm of China's state owned CNPC, fell 1.02% on Monday, the first trading day since the oil spill.

However, the stock gained 2.28% on Tuesday, buoyed by the company's quick reaction. BP's shares have declined 41.8% from $60.48 on April 20, to $35.20 as of July 20 on the NYSE, against an 8% decline in the Dow Jones Industrial Average.

A report by ProPublica, co-published with The Washington Postearlier this year, revealed BP's gross violation of safety norms and breaches of environmental standards over the years, with leaks and explosions in its Alaska, California, and Texas operations. CNPC also has a history of explosions and other disasters, such as at Chongqing in 2003 and Lanzhou in 2006.

Economic repercussions are also diverse. Oil and gas exploration, commercial fishing and tourism account for about 9% of the GDP for U.S. Gulf states. The oil spill disaster has disrupted activities in all these industries, while fishing and tourism may be tainted for generations, as the leak has destroyed marine life and the region's scenic beauty.

On the other hand, the port of Dalian resumed container operations on Monday evening, and according to Xinhua News Agency, the state-run news agency, the port handled 11,000 20-feet containers by Tuesday morning. Analysts are apprehensive of disruptions in grain supply and iron ore storage, but shipments have been rerouted to other ports.

Karvy Global Services (www.karvyglobal.com), a subsidiary of the Karvy group (www.karvy.com), provides specialized research in asset classes including stocks, mutual funds and insurance to leading Wall Street firms.

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