November 14, 2011 / 4:56 PM / 6 years ago

UPDATE 3-Chevron suspects drilling caused Brazil oil spill

* Chevron admits drilling probably led to oil spill
    * Drilling raised pressure, led oil to leak: official
    * Government authorizes Chevron to cap, abandon well
    * Incident may boost scrutiny of offshore operations

    By Sabrina Lorenzi
    RIO DE JANEIRO, Nov 14 (Reuters) - Chevron Corp. 
said on Monday an appraisal well drilled at the U.S. company's
Frade field last week might be contributing to an oil spill, in
line with early assessments by government officials.
    Earlier in the day, the head of the oil regulatory agency
ANP said that drilling likely increased pressure on the area
where the well is located, leading to the leak. The appraisal
well was closed in at surface last week as a part of Chevron's
precautionary suspension of drilling activities.
    "There has also been significant progress on investigations
into the source and cause of the oil that had been detected
coming from a small number of seep lines in the vicinity of a
Frade development drilling operation," the statement said.
    Chevron, which previously had found no definitive evidence
that the drilling could be a cause for the leak, is boosting
efforts to close and abandon the appraisal well, the statement
said.
    Oil seeps have created a "sheen" with a volume of 400 to
650 barrels of oil on the ocean in the area, which lies 370
kilometers (230 miles) northeast of Rio de Janeiro.
    President Dilma Rousseff on Friday urged a thorough
investigation of the incident, which may increase scrutiny of
safety in Brazil's offshore operations as it seeks to tap huge,
newly found reserves and become a major oil exporter.
    "What was detected is that with the drilling, there was an
increase in pressure and there was a crack in the rock which
caused the oil to leak to the surface," ANP Director Floriano
Carvalho told Reuters.
    Carvalho said the leak is continuing and that the ANP had
authorized Chevron to cap the well. Chevron had previously said
it suspended drilling the well, but that production was
continuing. The company maintains that production activities
are unrelated to the oil seeps.
    Chevron said it had up to eight vessels working at the
"sheen," and "continues to engage resources from Chevron Corps
global response team" to control the spill.
    IMPACT UNCLEAR
    Adriano Pires, an analyst at the Brazilian Center for
Infrastructure, said it is too early to know whether the spill
will slow Brazil's plans to develop ultra-deepwater fields in
the prolific region known as the subsalt, which is believed to
hold more than 50 billion barrels of oil.
    The Frade field is located in the Campos Basin, which
produces the vast majority of Brazil's oil, in water depths of
1,200 meters (3,800 feet). The company has said Frade is not
part of the subsalt.
    "We have to hope that the currents don't wash the oil
toward the shore, because then the issue will get politicized,
we could hear people calling for future auctions to be
postponed or canceled," Pires said.
    "It's a warning for the government to make sure it has
regulatory agencies that can minimize this sort of incident."
    Last year's BP spill in the Gulf of Mexico spurred
greater vigilance by regulatory authorities over Brazil's
offshore operations, state oil company Petrobras has
said.
    New investments in the subsalt are on hold due to a
political dispute over how to distribute royalties among
states.
    According to Chevron's website, it had drilled and
completed eight development wells and four injection wells at
Frade as of the end of 2010.
    Chevron holds stakes in the Papa-Terra and Maromba projects
in the Campos Basin. In the neighboring Santos Basin, Chevron
holds a 20 percent stake in Block BS-4.
    Petrobras expects output in Brazil to more than double to
nearly 5 million barrels per day as it ramps up production from
fields in the subsalt region.

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