ConocoPhillips Seeks Arbitration with CNOOC Over Oil Tax

U.S. oil major ConocoPhillips (COP) has asked for arbitration in a dispute with China National Offshore Oil Corp. over costs incurred due to Beijing's windfall tax on oil sales, according to people familiar with the situation.

The move and its outcome will be closely watched by other foreign energy companies whose production contracts with China's largest offshore oil producer state that any new government-imposed rule which causes a material change in their returns can be challenged outside China.

The windfall tax has cost the energy industry billions of dollars since it was introduced in March last year, and has prompted U.S. firms to cite it as an example of the difficulties of doing business in China.

We always have to make choices in the markets. Markets usually lead to efficiency. When markets don't achieve efficiency, government intervention can improve societ's welfare.