--Brazil oil regulator criticizes Chevron for November oil
spill
--ANP to determine Chevron fines in 30 days
--Fines won't reach the maximum BRL50 million, says ANP director
general
--ANP exonerates drill rig operator Transocean, takes no further
measures
RIO DE JANEIRO--Brazil's oil regulator laid heavy criticism on
U.S. oil company Chevron Corp. (CVX) Thursday for an oil spill at
an offshore field last November, but said it has no objections to
the firm restarting production.
Some 3,700 barrels of crude oil leaked from the Frade oil field
as a result of an accident that could have been avoided had Chevron
followed its own safety procedures, Magda Chambriard, head of the
National Oil Agency, or ANP, told reporters at a press
conference.
The size of the spill was higher than the ANP's previous
estimate of 3,000 barrels and Chevron's estimate of 2,400
barrels.
The director general spoke at the publication of the ANP's final
report into the spill at Frade, which lies in Atlantic waters of
Brazil's southeast coast. The report has been delivered to Chevron
and to Brazil's government-run oil company Petroleo Brasileiro SA
(PBR, PETR4.BR), a partner in the Frade field, and will be released
to the public Friday, Ms. Chambriard said.
Chevron will be fined close to the maximum 50 million Brazilian
reais ($25 million), said Ms. Chambriard, although she reiterated
her regret that rules don't allow for heftier fines. The total fine
for 25 infractions will be determined within 30 days, she said. The
ANP is discussing possible reform to the system of fines with the
Mines and Energy Ministry, she said.
Chevron said it was still reviewing the ANP report but took
issue with some of the findings.
"We disagree with the report's characterization of our safety
culture," Chevron spokesman Kurt Glaubitz said. "We are confident
that at all times during the Frade incident we acted appropriately
and responsibly, consistent with industry best practices, and
within the plan of development approved by ANP."
Ms. Chambriard said Chevron will present its request to restart
production at Frade on July 27, and the regulator said she has no
objection. The company had asked ANP to be allowed to suspend
production in March after a second leak was discovered close to
Frade.
Chevron said it was too early to tell how long it would take to
resume production.
But water injection into the Frade well remains suspended, as
does further drilling, Ms. Chambriard said. To resume those
activities, Chevron must show it understands the causes of the
accident and has taken measures to limit risks of future ones, she
said. The official said the ANP is still investigating the March
incident, and that more fines could be applied relating to that
case.
Chevron will likely continue to pursue projects in Brazil, home
to potentially tremendous oil reserves, despite a possible $25
million fine and the political headaches resulting from the spill,
said Lysle Brinker, research director at IHS Inc.
"As long as more rational heads and policies prevail, Chevron
would want to continue looking for opportunities there," Mr.
Brinker said. "Brazil is not as attractive as it used to be, but it
is too big to ignore."
Meanwhile, Ms. Chambriard said that it found no fault with the
steps taken by drill rig operator Transocean Ltd. (RIG, RIGN.VX),
and it hasn't taken any measures against the company.
A Transocean spokesman said the company was reviewing the ANP
report but was "encouraged" that it did not appear to fault the
company.
The ANP's findings could undercut the civil and criminal
lawsuits against Chevron and Transocean for their roles in the
incident at the Chevron-operated Frade offshore oil field, said
Christopher Garman, Latin America director for consultancy Eurasia
Group. Both companies have denied any wrongdoing.
"The fact that the ANP allowed Chevron to begin production is a
more measured response," Mr. Garman said. "The chance of the
lawsuits being successful weren't high to be begin with and look to
be diminishing."
--Matthew Cowley in Sao Paulo contributed to this article.
Write to Brian Asher at brian.asher@dowjones.com
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