Chevron may get Brazil drill rights back: ANP

RIO DE JANEIRO Tue Mar 13, 2012 8:01pm EDT

RIO DE JANEIRO (Reuters) - Chevron (CVX.N) could win back its suspended offshore oil drilling rights in Brazil "within months" if it can convince the country's oil regulator that it understands why a November spill happened, Magda Chambriard, the regulator's chief, told reporters on Tuesday.

The reasons given by San Ramon, California-based Chevron, the No. 2 U.S. oil company, for the estimated 2,400 to 3,000 barrels spilled in the Frade field northeast of Rio de Janeiro, differ from those discovered by the regulator, known as the ANP, during a four-month investigation which is now complete, Chambriard said.

"We are not convinced that Chevron has identified the causes of the accident and that the risks have been mitigated to the satisfaction of Brazilian society," she said in her first press conference since being appointed ANP chief on March 8.

The suspension of drilling rights in Brazil has stalled operations at Frade, the largest foreign-operated field in Brazil and is delaying the creation of new wells in the field to maintain output.

Problems associated with Frade could cause Chevron to rethink its operations in Latin America, a region where it operates in four countries. While Chevron has expanded in Latin America in recent years, rising resource nationalism and tighter regulation have seen many Chevron rivals cut back.

The ANP said last November that the company had been "negligent" in planning the drilling, revoked its license and slapped a series of fines on the firm. A federal police investigation said the company significantly reduced drilling safety margins in the well that led to the leak, compared with previous wells in Frade.

Chevron has said it has followed industry practice and accepts "full responsibility" for the spill.

Prosecutors have launched a civil damages suit for 20 billion reais ($11.2 billion) against Chevron. Federal prosecutors and police have said they are preparing criminal charges against executives of Chevron and Transocean (RIGN.VX), the company that operates the Sedco 706 rig that drilled the well where the spill occurred.

Chevron stopped the oil leak, less than 0.1 percent of the size of the 2010 Deepwater Horizon spill in the Gulf of Mexico, in four days and staff have been forthcoming with Brazilian authorities, Chief Executive Officer John Watson told reporters on Tuesday in New York.

"We regret the incident, but there wasn't damage, and we expect to be treated as Petrobras or other companies would be treated in a similar circumstance," he said.

Executives at Brazil's state-led Petrobras (PETR4.SA), Brazil's main producer and 30 percent partner with Chevron in Frade, have never faced criminal charges even for much larger and more damaging spills, the Rio de Janeiro-based company said.

While Chambriard said Chevron has failed to satisfy the ANP that it can fix the problem she added that she is confident that a company as big and experienced as Chevron will be able to eventually meet the ANP's requirements and get its license back.

Chevron, which feels it is being singled out, suggested it may review its presence in Brazil.

"Our participation in Brazil will be a function of the degree to which they welcome Chevron and other companies and the degree to which we are treated fairly," Watson said.

Chambriard, for her part, questioned some foreign companies' seriousness about operating in the country.

"Companies come to Brazil and say we are part of their core business," the ANP chief, an oil reservoir engineer, said. "Yet when we ask for information they say they have to get approval from abroad. They list local people as responsible but all decisions are made outside the country."

The ANP report which is undergoing final editing and graphic production, will be made public, Chambriard said. She gave no date for its release and said that Chevron will have a chance to challenge its findings.

(Reporting by Jeb Blount and Sabrina Lorenzi in Rio de Janeiro and Peter Murphy in Brasilia; Editing by Marguerita Choy, David Gregorio and Bob Burgdorfer)

Comments (0)
This discussion is now closed. We welcome comments on our articles for a limited period after their publication.