UPDATE 2-Court lifts Brazil ban on Transocean, Chevron ban eased

Mon Oct 1, 2012 1:50pm EDT

* Judge said losses to public outweigh merits of injunction
    * Ban was part of suit seeking about $20 bln for oil spill
    * Chevron ban upheld except for spill mitigation, monitoring
    * Transocean ban still applies to Frade field


    RIO DE JANEIRO, Oct 1 (Reuters) - A Brazilian court
overturned a ban on operations by offshore drilling contractor
Transocean Ltd, accepting government arguments that the
ban could cause billions of dollars in lost taxes for the
government and output for the state-led oil firm Petrobras
.
   Judge Felix Fischer, president of Brazil's second-highest
court -- the STJ, agreed with arguments from Brazil's petroleum
regulator, the ANP, according to a copy of the ruling obtained
by Reuters.
    A ban on Transocean, the world's largest offshore drilling
contractor, could deprive Brazil of 126 million barrels of oil,
an amount equivalent to about two months of Brazilian output,
the ANP said. It would also deprive the government of 6.71
billion reais ($3.31 billion) royalties over two years.
    If it had remained, the injunction would have shut down
Transocean's 10 drilling rigs operating in Brazilian waters,
eight of them under contract by Petrobras, as of Oct. 27. 
    Transocean owns two of the three drilling rigs in Brazil
that can drill in more than 2,200 feet of water. Such
"ultra-deep-water" is where most of Brazil's most promising new
reserves are located. Brazil is counting on tax revenues from
those reserves to boost the economy and reduce poverty. 
    "The reasons attached by the petitioner, rightly accompanied
by technical data, exhaustively show that the economic damage is
not restricted to the companies involved," Fischer wrote in his
decision.
    The court, though, only eased a related ban on Chevron
Corp's Brazil operations. The No. 2 U.S. oil company may
continue only those activities related to the mitigation and
monitoring of a 3,600 barrel November oil spill in the Frade
offshore field northeast of Rio de Janeiro that led to the ban.
    Transocean shares rose 4.3 percent in New York, their
biggest one-day jump in six days, after the ban was lifted.
    Petrobras preferred shares, the company's most-traded class
of stock rose 1.4 percent in Sao Paulo, their first gain in
three days. Chevron rose 1 percent in New York.
    A total ban on Chevron operations, the judge said, might
prevent the company from continuing a cleanup, potentially
harming the environment. Its activities will be monitored by
Brazil's petroleum regulator, the ANP.
    "I authorize Chevron to maintain only mitigation and
observations operations stemming from the accident in the Frade
Field under the supervision and coordination of the ANP."
    Chevron says the leak from the field was controlled in
November and that it shut operations at the field in March when
unexplained traces of oil showed up in the same area.
    Chevron had contracted Transocean's Sedco 706 rig to drill
in Frade, where the ban on Transocean remains in force. Chevron
and Transocean say they were not negligent in the spill and are
fighting the lawsuits and related criminal charges.
    The ANP said in a July report that Transocean had no
responsibility for the spill and that while Chevron made errors
in its drilling plan, failed to meet some safety requirements it
and could have avoided the spill but that it was not negligent.
 
    The ANP fined Chevron $17.3 million, a fine which has been
paid. 
    The court document seen by Reuters is likely to be published
early this week but was signed by Fischer on Friday.
    Brazil is in the early stages of developing its massive
subsalt geological oil play, which could hold upward of 100
billion barrels of oil.
    A shortage of drilling rigs able to operate in waters more
than 2,000 meters deep has restrained Petrobras' push to bring
on this new oil despite a $237 billion five-year expansion plan.
    "The original injunction was groundless and targeted
Transocean unfairly," a Transocean spokesman said. "The company
and its employees were completely exonerated by ANP's
investigation which concluded that the leak resulted from
geological factors and was totally unrelated to the actions of
the Transocean rig crew."
    Chevron and Petrobras officials did not immediately respond
to requests for comment.
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