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Chevron Appeals Brazil Ban, Seeks Oil Field Restart

Source: Reuters 8/17/2012, Location: South America

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Chevron, the No. 2 U.S. oil company, has appealed against an injunction banning it and its drilling contractor Transocean Ltd (RIG.N) from operating in Brazil while civil and criminal charges over an oil spill last November are judged.

The company is also looking to restart output at the site of the spill, the Frade offshore field northeast of Rio de Janeiro, Chevron press spokesman Kurt Glaubitz said in an e-mailed response to questions from Reuters. Chevron shut down operations there in March after more oil was found in surrounding waters.

Prosecutors are seeking nearly $20 billion in damages for the spill and have charged 17 Chevron and Transocean executives with crimes that carry jail terms of up to 31 years. Chevron denies criminal wrongdoing and says the proposed damages are excessive. The accident leaked about 3,000 barrels, less than one thousandth of BP's 2010 Deepwater Horizon disaster in the United States, with Chevron saying the source of the spill was contained in four days.

"Chevron's response to the incident was implemented according to the law, industry standards and in a timely manner," Chevron said in a statement. "Monitoring of the incident area shows no discernible environmental impact to marine life or human health. No oil has reached Brazil's coast nor any other country."

The Brazilian prosecutor, Eduardo Santos de Oliveira, who won the injunction has called the November spill and later unexplained leaks in the area one of the worst ecological disasters in Brazil's history and is seeking the country's largest ever civil damages.

GEOLOGY REVIEW
The injunction against operating in Brazil, sought by Oliveira and granted by a Rio de Janeiro-based federal court on August 1, carries penalties of up to 500 million reais ($247 million) a day for non-compliance. It prohibits Chevron and Transocean from participating in oil production and transport operations in Brazil.

The injunction has yet to come into effect, Chevron and Transocean officials said. Unless overturned it will take effect 30 days after the ruling is fully processed by the courts and formally served on the companies. Since March, when the Frade field was shut, Chevron and its partners in the field have been reviewing its geology and working with Brazil's petroleum regulator, the ANP, to understand the causes of the leak and determine if production can be restarted.

Chevron owns 52 percent of Frade and is the operator. Brazilian state-led Petrobras owns 30 percent and Frade Japao, a group made up of Japan's Inpex Corp and Sojitz Corp, owns 18 percent. Petrobras said Wednesday it would back Chevron's efforts to restart output and that it does not agree with the court and prosecutors' view of the spill.

Petrobras owns 30 percent of the output from Frade, which had achieved production of more than 70,000 barrels a day before the spill. The field's closure has helped cut Petrobras output in recent months despite a $237 billion five-year expansion plan. If Transocean, the world's largest operator of offshore drilling rigs, is also banned, Petrobras would have to give up drilling systems operating in some of its most promising offshore areas. Transocean has 10 drilling platforms operating in Brazil. Seven of them work for Petrobras, according to Transocean and its latest Fleet Report. Transocean considers the charges unfounded and has promised to fight them, its press office said. It also plans to appeal the ban.

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