February 20, 2013 / 7:16 PM / 5 years ago

UPDATE 3-Chevron, Transocean say Brazil drops criminal oil spill charges

* Companies still face civil lawsuit over 2011 oil spill
    * Case has helped chill interest in Brazil's oil frontier
    * ANP OK for Frade field restart delayed by holidays -source

    By Jeb Blount
    RIO DE JANEIRO, Feb 20 (Reuters) - A Brazilian judge dropped
criminal charges against Chevron Corp, Transocean Ltd
 and 17 of their employees related to a November 2011
offshore oil spill, the companies said on Wednesday.
    The criminal case, and a civil suit seeking as much as 40
billion reais ($20.4 billion) in damages, have cast a chill over
Brazil's oil industry.
    The criminal suit carried penalties of up to 31 years. The
still-open civil case is Brazil's largest-ever environmental
lawsuit, even though the amount of oil spilled was much less
than other recent spills in Brazil and abroad.
    Brazilian oil output fell in 2012, and shutting Chevron
operations in the South American country contributed to the
decline. Investor interest was already waning in the face of
regulatory changes and a bitter dispute over royalties that have
blocked the sale of new exploration licenses for four years.
    "Chevron has been tied up for more than a year over a spill
that caused no real damage," said Adriano Pires, head of the
Brazil Infrastructure Institute, a Rio de Janeiro energy
think-tank. "It's impossible to understand how a country that
wants to attract investment would have taken so long to dismiss
the case against Chevron."
    He said failure to resolve the legal actions related to the
spill will make it hard for Brazil to attract investment for
three oil and gas rights auctions planned for later this year.
    With criminal charges dismissed, industry watchers will
focus on the civil case and Chevron administrative efforts to
restart output in the Frade field, where the spill occurred in
November and all output was stopped in March.
    In December, Chevron and Brazilian prosecutors said they
were near a settlement in the civil case and that Chevron was
ready to pay 311 million reais ($159 million) to compensate for
damages caused by the spill, less than 1 percent of the amount
initially sought. 
    The prosecutor called the offer "reasonable." Chevron said a
settlement would render the suits extinct and that it, and not
Transocean, would pay all costs.
    Chevron said in December that a settlement of 30 million
reais would be reasonable. They based their estimate on the size
of financial awards in the Deepwater Horizon case and Exxon
Valdez spill in Alaska in 1989.
    In December, Chevron expressed hope that it would be able to
restart output at the Frade field by early January. But output
remains stalled. Court holidays delayed resolution of the civil
case and Brasil's oil regulator, the ANP, moved more slowly than
expected on renewing Chevron's authorization to pump oil from
the Frade field, an oil industry executive involved in planning
for the field told Reuters.
    Chevron and its partners "had hoped to be producing oil
again from Frade by now," said the executive, who asked not to
be named because he is not authorized to talk to the press. "We
got caught by the year-end, then the Carnaval holidays."
    The Frade field is 52 percent owned by California-based
Chevron, 30 percent by Brazil's state-led Petroleo Brasileiro SA
 and 18 percent by Frade Japão, a group owned by
Japanese trading companies Inpex Corp and Sojitz Corp
    Chevron's global output in 2012 was 70,000 barrels per day
short of company expectations. The loss of Frade was responsible
for about 40 percent of that loss, according to Chief Financial
Officer Patricia Yerrington.
    Restart requires approval of the ANP. The regulator's
website said the restart was not on the agenda of its board
meeting Wednesday, and officials could not be immediately
reached for comment.
    Petrobras, as the Brazilian company is known, Sojitz and
Inpex were never charged in relation to the spill.
    The press offices of Chevron and Transocean confirmed a
Reuters report of the dismissal of criminal charges, which had
been based on three sources with direct knowledge of the case.
    One of the sources told Reuters that prosecutors can still
appeal the ruling dismissing the charges, made by Judge Marcelo
Luzio of the 10th Criminal Unit of the Rio de Janeiro Federal
Court. The sources asked not to be named because their employers
do not allow them to speak about the case.
    "We welcome this news that the Court recognized, with
respect to the Frade event of November 2011, that Transocean's
crews did exactly what they were trained to do, acting
responsibly, appropriately and quickly while always maintaining
safety as their top priority," Guy Cantwell, a Transocean
spokesman in Houston, said in an e-mailed statement.
     The criminal charges were filed last March by Eduardo
Santos de Oliveira, the same Brazilian prosecutor who filed the
civil lawsuit. Oliveria, who is on vacation, told Reuters on
Wednesday he had not yet been informed of the dismissal.
    Dos Santos, who works from Campos, Brazil, in northern Rio
de Janeiro state, was taken off the cases when they were moved
to the city of Rio de Janeiro, the state capital. He considers
the spill one of the worst ecological disasters in Brazil's
    But the ANP reported last year that the 3,600 barrel spill
in the Frade field was quickly stopped, cleaned up and caused no
discernable environmental damage.
    The spill was less than 1/1000th of the size of BP Plc's
 Deepwater Horizon disaster in 2010. The Frade spill never
came close to shore and no workers were injured. In the
Deepwater Horizon disaster 11 died.
    Chevron said in a statement that it "is pleased by the
court's decision. Chevron Brasil remains committed to its policy
of full transparency and close cooperation with the Brazilian
    Chevron shares fell 0.8 percent in New York on Wednesday
afternoon, in line with a broader stock market decline.
     Shares of Transocean, which was also operator of the
Deepwater Horizon rig which burned and sank in 2010 after BP's
Macondo well exploded in the Gulf of Mexico, dropped 3.4
0 : 0
  • narrow-browser-and-phone
  • medium-browser-and-portrait-tablet
  • landscape-tablet
  • medium-wide-browser
  • wide-browser-and-larger
  • medium-browser-and-landscape-tablet
  • medium-wide-browser-and-larger
  • above-phone
  • portrait-tablet-and-above
  • above-portrait-tablet
  • landscape-tablet-and-above
  • landscape-tablet-and-medium-wide-browser
  • portrait-tablet-and-below
  • landscape-tablet-and-below