China Yellow Sea Oil Spill May Be Cleaned in 5 Days

An oil spill caused by pipeline blasts at a terminal of China’s Dalian port may be cleaned up this week, allowing the country’s largest crude-oil terminal to resume receiving supplies for two PetroChina Co. refineries.

“We may be able to clean up the sea within roughly 5 days by allocating all possible resources,” Xu Guochen, secretary of the Dalian municipal government, told a press conference televised on Phoenix TV. The spill in northeastern China has been contained with floating barriers, PetroChina spokesman Mao Zefeng said by telephone from Hong Kong today.

The oil terminal was closed and one refinery was forced to draw on crude stockpiles, said a PetroChina official in Dalian, who can’t be named because he isn’t authorized to speak to the media. The Ministry of Transport ordered harbors across the country that offload oil to check their operations and halt operations at any deemed to be unsafe, according to a statement on its website today.

“The government is trying all means to clean up the spill and this will allow the port to reopen and restore crude oil supplies to the refineries soon,” He Wei, an oil analyst at brokerage BOCOM International Holdings Co. said by phone from Beijing. “The incident will have more impact on PetroChina’s reputation than direct economic losses.”

Coal Priority

Authorities restricted marine traffic on some routes to help the cleanup, the official Xinhua News Agency said, citing Wang Ning, a senior engineer from the marine affairs department of Liaoning province where the port is located. Most shipping activities, including the transport of coal for electricity generation, have not been halted, Wang was quoted as saying.

Authorities have given priority to ensuring coal supplies to the Dalian unit of Huaneng Power International Inc. during the marine traffic restrictions, Xinhua’s report said.

Dalian Port (PDA) Co., the operator of the terminal, fell the most in two months in Hong Kong after the July 16 explosion caused what Greenpeace says is the biggest spill in the country’s seas.

West Pacific Petrochemical Corp. has cut processing by 20 percent, commodity researcher C1 Energy said, citing people it didn’t identify. The 200,000 barrels-a-day refinery is jointly owned by PetroChina, Sinochem Corp. and Total SA.

PetroChina’s other refinery in Dalian has an annual capacity of 20.5 million tons, or 410,000 barrels-a-day.

Two Pipelines

An oil pipeline exploded late on July 16 near Dalian’s Xingang harbor, causing a smaller pipeline nearby to blow up, according to the official Xinhua News Agency. The fire was extinguished the next day, 15 hours after the initial blast, Xinhua said.

The blasts occurred a day after BP Plc capped its Gulf of Mexico leak and followed a Dec. 30 diesel fuel spill from a pipeline operated by PetroChina’s parent that polluted the Yellow River.

About 1,500 tons of oil spilled into the Yellow Sea, according to China National Radio. BP’s well spewed as much as 60,000 barrels of oil a day, or 8,220 tons daily, since an April 20 rig explosion until it was capped July 15, according to a U.S. government-led panel of scientists.

“It doesn’t compare in terms of size or seriousness with the BP oil spill,” Grace Liu, analyst at Guotai Junan Securities Co., said by phone from Shenzhen.

Incorrect Procedure

An incorrect procedure during the offloading of a tanker may have led to the explosion, Mao of PetroChina said. The cause is yet to be confirmed and an investigation is underway, he said.

The blast has “seriously” polluted 11 square kilometers (7 square miles) of sea and “slightly” affected 50 square kilometers, the Xinhua reported today, citing Wu Guogong, deputy chief of the municipal environmental protection bureau.

The spill is the biggest in Chinese waters and could have a long-term impact on the marine ecology of the area, Yang Ailun, a Beijing-based spokeswoman at Greenpeace, said by phone today. “This incident and the one at the Mexican Gulf have revealed the risks of economies being over-reliant on dirty energy.”

The government of Liaoning province has set up a taskforce to deal with the spill, the Ministry of Agriculture said on its website. Liaoning Governor Chen Zhenggao called for 1,000 fishing boats to be dispatched to help with the clean up, the Dalian Daily reported today, citing a speech he gave yesterday.

Hundreds of Staff

Hundreds of staff from PetroChina’s state-owned parent, China National Petroleum Corp., are working with local and central government agencies to remove the oil, Mao said.

More than 20 vessels have been deployed to spray chemicals and a 7-kilometer barrier has been set up to contain the spill, China National Radio said today, citing Huang Yong, deputy chief of Dalian city’s Maritime Safety Administration. The port is capable of handling 57 million tons of crude annually, according to the website of its parent, PDA Corp.

Dalian Port declined 5.1 percent, the biggest drop since May 19, to close at HK$3 in Hong Kong. PetroChina, a unit of the country’s largest oil company, fell 1.4 percent to HK$8.46 while the benchmark Hang Seng index lost 0.8 percent.

--Wang Ying, Chua Baizhen, Winnie Zhu and John Duce.

To contact the reporter on this story: John Duce in Hong Kongt . Jduce1@bloomberg.net

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