The State Oceanic Administration (SOA) announced on Aug 16 that it will publicly recruit law firms to build a case against the company. According to current administrative provisions, a 200,000 yuan ($31,340) fine will probably be the maximum penalty for ConocoPhillips but further legal consequences are clearly needed.

The problem, however, is that claims from related government agencies and individuals could hit obstacles within the framework of China's laws and regulations over marine contamination. It is pretty obvious that authorities lack experience in dealing with incidents of marine pollution. What needs to be done to properly handle oil spills and to avoid future ones?

Once a spill is identified, an oil company is required to immediately release all related information to the public. This was not the case for the Penglai oil leaks. For the oil spill in the Gulf of Mexico last year, British Petroleum publicly released related information four days after the incident and opened up an online forum to publish related information and developing news. The US government also made an official website to indicate the government's measures and provided contact information to authorities.

If China enforces more loss assessments and spill investigations, and evidence collection are carried out earlier, pollution control and environment rescue efforts will be more effective.

Second, cleaning up an oil spill and making claims against the oil company should be clearly governed by laws and regulations. The US law clearly indicates that polluters should report related information on oil spills to the US Coast Guard immediately and take measures to clean it up. If the polluter is not able to or does not fulfill its responsibilities, the government will appoint an agency to carry out the cleanup and seek compensation from the oil company. A monetary penalty is also collected from the polluter.

Oil spills require enormous financial settlements. In the US, the court can ask polluters to pay for economic and environmental losses. Citizens can also sue for compensation. The damages list could include cleaning up costs, wildlife protection, coastline protection and losses to residents whose businesses were hurt by oil leaks. For the major oil spill in Gulf of Mexico, BP was asked to create a compensation fund of $20 billion.

A specialized agency in China should also be established to take on the responsibility of investigating and punishing responsible parties. In the US, the Environment and Natural Resources Division under the Department of Justice takes charge of any investigation. In addition to the large amounts of monetary sanctions for oil leaks, if the polluter did not report an oil spill to the authorities in time, the court proposes harsher penalties. Water pollution fines in other countries are usually large sums, not only because of its environmental damages but also because severe penalties are necessary for shielding marine pollution.

The Penglai oil spill will likely end with compensations and an environmental cleanup. So far, we have not seen any damage estimations. These estimations do not need to be very accurate and the numbers could be updated as the oil spill cleanup develops. But the damage estimates are necessary because it could inform polluters of the seriousness of a spill.

As China seeks to tap into the ocean floor for oil, the risk of marine oil contamination is increasing. How other countries deal with ocean pollution from drilling is worth studying. How China settles with claimants after the Penglai oil spill could be the standard for China because the case provides a good reference for establishing laws and regulations, procedures and strategies on marine contamination. Therefore, the relevant authorities should come up with damage estimates as soon as possible, and this will likely force ConocoPhillips to attach greater importance to the spill and hopefully to speed up clean-up efforts. And if the cost estimate is higher than expected, the cleanup efforts of ConocoPhillips should correspond to that figure. Specifically, the establishment of a special fund such as the one that BP established could be a good choice to guarantee compensation.

In recent years, the oil and natural gas production of China National Offshore Oil Corporation (CNOOC) has grown rapidly. But the oil spill in Bohai Bay challenges the large-scale expansion plan of CNOOC, particularly its deepwater exploration efforts. CNOOC in 2008 announced that it would invest 200 billion yuan into its up-stream oil and gas exploration over the period of 2009 to 2020. It is estimated that the proven reserves in the South China Sea amount to 3.1 billion tons of oil equivalent, and most of which are distributed in deepwater and ultra deep water areas. The question now becomes: Have CNOOC's expansion plan carefully considered and evaluated potential risks of spills?

Future oil and gas exploration should focus on deepwater drilling. For China, after decades of exploration, the probability of finding new large oilfields on land decreases substantially and the current oil fields are facing depletion and increasing costs. If we cannot figure out how to find an alternative to oil in the near future, the oceans will likely be the focus of future oil and gas exploitation. Climbing oil prices also gradually alleviate the high costs of deepwater exploitation. The strategy of deepwater exploration seems to be a necessary choice for China and for CNOOC. Formulating effective, safety-oriented and environmentally friendly development strategies will be the key for avoiding future spills.

The final report on the Penglai oil spill should include not only the operating and management problems of ConocoPhillips, but also point out the supervision problems of related agencies and loopholes of laws and regulations in China. The government should update all safeguards related to offshore drilling and ensure the transparency of information. For China, the Penglai oil spill could be a reminder and an important step to avoid similar future spills. The confusing situation so far seems to indicate that an independent agency should be established quickly, focusing on safety in offshore oil drilling.