RIO DE JANEIRO (Reuters) - Brazil's government has been quick to vilify Chevron Corp for an offshore oil spill, but the biggest victim of the accident could turn out to be its own ambitious dream of exploiting its new oil riches.
The second-largest U.S. oil company has emerged bruised from a week in which it was fined $28 million, had its local chief executive hauled in front of Congress and then had its Brazilian drilling rights suspended as punishment for the undersea leak estimated at 2,400 barrels.
Yet industry insiders believe California-based Chevron will win back its rights, barring the discovery of any criminal or gross negligence in its Frade field where the accident occurred. The fine is tiny compared to the company's $187 billion market value and it said on Friday it is interested in bidding on new concessions in Brazil.
The more lasting legacy of the spill may be an awareness that Brazil has overestimated its capacity to exploit deep, technically challenging "subsalt" reserves and become the world's third- or fourth-biggest oil producer by 2020.
Chevron has admitted responsibility for the spill but experts say the mistake it made -- a misjudgment of reservoir pressure and rock strength hundreds of meters beneath the ocean floor -- partly reflects the huge difficulties of operating in such extreme conditions.
"This spill shows that there is much that we still don't know," said Segen Estefan, a professor of undersea engineering at the Federal University of Rio de Janeiro.
"We have to recognize that we really don't fully understand the risks and need to do much more to not only make drilling safer but find ways to clean up spills. As you go deeper everything gets more difficult."
The Chevron accident follows a series of recent accidents on platforms owned by state-controlled oil firm Petrobras that have raised questions about Brazil's ability to cope with safety and environmental risks and cooled euphoria over the vast reserves that lie up to 7 km (4.4 miles) below the ocean surface.
Brazil's government has said the risks of drilling in the so-called subsalt region are low, justifying a legal overhaul that gave Petrobras a dominant role in operating new fields and restricted opportunities for foreign companies.
"The spill shows that nobody was properly prepared, not Chevron, not the government, not the regulators," said Ildo Sauer, Petrobras's former top natural gas executive and a one-time energy adviser to Brazil's President Dilma Rousseff.
"We need to totally rethink our safety paradigm. The whole over-optimistic, patriotic idea that offshore oil will solve all our problems is getting ahead of ourselves," said Sauer, now an energy engineering professor at the University of Sao Paulo.
While Chevron operates the Frade field, it owns only 52 percent of the concession. Petrobras owns 30 percent and Frade Japao, a Japanese group, owns the rest. The spill is largely dispersed and what is left is moving away from Brazil's coast.
Brazil, the world's seventh-largest economy, has staked its economic future on the oil riches, viewing them as a ticket to developed-nation status and a chance to build a vast domestic oil services industry and high-value knowledge-based jobs.
Chevron's accident and Petrobras' safety woes may now force the government to acknowledge the risks of developing the fields and introduce new regulation that could slow development and raise costs.
The 4-million-barrel BP Deepwater Horizon disaster in the Macondo field in the Gulf of Mexico last year had already prompted a rethink of regulation in Brazil, whose offshore Campos and Santos basins near Rio de Janeiro produce more than 1.8 million barrels a day, more than the United States does in the Gulf of Mexico.
Then fires, explosions and worker safety complaints on Petrobras production platforms in the Campos basin, some of them nearly three decades old, led Brazil's oil regulator to force several early maintenance shutdowns.
But more than a year after promising a comprehensive spill response system involving Brazil's Navy, the ANP oil regulator, Brazil's Environmental Protection Agency, and oil companies, no basic plan has been delivered to Rousseff.
The safety shutdowns have already slowed Petrobras' output growth despite its $35 billion to $45 billion recent annual spending and its plans to spend $225 billion more over five years in the world's largest corporate investment plan.
Petrobras' output grew just 0.58 percent in the first 10 months of 2011 to 2.6 million barrels a day of oil and natural gas equivalent in Brazil and abroad. Its stock price has lost a fifth of its value so far this year.
"The platform shutdowns because of safety concerns have cut into targets and timetables," said Lucas Brendler, an oil and gas analyst with Banco Geracao Futura in Porto Alegre, Brazil. "The Chevron Frade spill is likely to force the industry to take even more precautions and the government to step up regulation."
Delays in meeting ambitious production targets may be about to claim a first victim. Lupatech, one of Brazil's largest home-grown oil equipment and service companies, said last week that it is facing a cash shortage and tried to stave off a $275 million bond default.
The company, which took on large debts to expand in expectation of an offshore oil boom, said delays in developing the new offshore discoveries were partly to blame.
While drilling rules are likely to be tightened, the government has no intention of slowing down offshore development, said Delcidio Amaral, a senator and a member of Rousseff's ruling Workers' Party.
"The spill is one of those bad news events that could be good for the country; it's a wake-up call that will help us tighten safety more," said Amaral, who was formerly head of exploration and production at Petrobras. "But the government and Petrobras have a timetable and they plan to keep it."
Petrobras, which accounts for about 10 percent of Brazil's economic output, sparks a nationalist pride in many Brazilians akin to that felt by Americans for their space agency, NASA.
The risk is that Brazil's overhaul of its oil laws, passed by Congress late last year, will overload Petrobras with too many obligations, causing further delays on existing projects.
The law made Petrobras the exclusive operator in all new concessions to be sold in the subsalt area with a minimum 30 percent financial stake in all concessions.
"They are having trouble doing what they are trying to do now, there is a lack of people and resources and equipment," a former senior Petrobras executive said on condition of anonymity. "Under the new rules it's going to get worse."
Editing by Stuart Grudgings and Bob Burgdorfer