UPDATE 2-Brazil says Chevron can restart offshore oil output

Mon Apr 8, 2013 8:14pm EDT

* Restart authorized about a year after field shutdown

* Field produced 70,000 barrels a day before 2011 spill

* Frade restart could happen within days, source says

By Jeb Blount

RIO DE JANEIRO, April 8 (Reuters) - Brazil's oil regulator, the ANP, said on Monday that it authorized Chevron Corp to restart output from an offshore oil field more than a year after a November 2011 spill forced the No. 2 U.S. oil company to stop Brazilian production.

Output at the field could begin within days, a source with direct knowledge of the ANP's decision said on Monday.

Chevron was granted permission to restart output from four wells at the Frade field for one year and conditional approval for up to two months to produce from two other wells if they are needed to balance oil and natural gas pressure in the reservoir, the ANP said in a statement.

The ANP also imposed additional, unspecified limits on the flaring of natural gas from the field. Flaring is the burning of gas that can't be shipped to market or reinjected in the well.

In December company officials said they could start output "almost immediately" after receiving ANP authorization to restart operations.

"Our preparations to restart will begin shortly following all safety procedures," said Chevron spokesman Jim Craig in an emailed response to questions.

The Frade field was shut in March 2012 "as a precautionary measure," Craig said. The March shut-in came after a November leak of about 3,800 barrels of oil and the appearance of small and unexplained amounts of oil in the area after the initial spill.

Frade was producing about 70,000 barrels a day when the accident happened and about 35,000 when shut in about four months later.

Brazilian prosecutors are seeking 40 billion reais ($20.1 billion) in civil damages for the November 2011 spill from Chevron and its drilling contractor Transocean Ltd. It is Brazil's largest-ever environmental lawsuit.

Brazil's oil regulator said the spill caused no discernable environmental damage. Criminal charges against Chevron and 17 employees were later dismissed by a judge. The employees could have faced up to 31 years in prison.

Chevron and Transocean have said they have done nothing wrong, and in December prosecutors said they were close to a deal that would see Chevron pay about 311 million reais ($156 million) to settle the claims.

Brazilian prosecutors never charged Frade's partners in the Frade field.

The Frade field is 52 percent owned by San Ramon, California-based Chevron, which is also the operator. Brazil's state-controlled Petroleo Brasileiro SA, commonly known as Petrobras, owns 30 percent and Frade JapĆ£o, a joint venture between Japanese trading houses Sojitz Corp and Inpex Corp, has an 18 percent stake in the project.

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