November 23, 2011 / 7:31 PM / 8 years ago

UPDATE 2-Brazil suspends Chevron's drilling rights

* Brazil oil regulator sees signs Chevron was "negligent"
    * Chevron's request to drill deeper in subsalt area denied
    * Chevron executive says company acted quickly, safely

    By Peter Murphy
    BRASILIA, Nov 23 (Reuters) - The Brazilian government on
Wednesday suspended Chevron Corp's drilling rights in
Brazil until it clarifies the causes of an offshore oil spill,
the latest twist in a political firestorm threatening the U.S.
company's role in Brazil's oil bonanza.
    The decision was announced as the chief executive of
Chevron's Brazilian unit was testifying before the Brazilian
Congress, where he publicly apologized for the Nov. 8 spill
that leaked about 2,400 barrels of oil into the ocean off the
coast of Rio de Janeiro.
    Brazil's National Petroleum Agency said it decided to halt
Chevron's drilling rights after determining that there was
evidence that the company had been "negligent" in its study of
data needed to drill and in contingency planning for abandoning
the well in the event of accident.
    The agency, known as ANP, also rejected a request from
Chevron to drill deeper wells into subsalt areas in the Frade
field where the spill took place. The Frade field, which is
located in the oil-rich Campos Basin, is the only block in
Brazil where Chevron is producing oil and is the operator.
    The Campos Basin is currently the source of more than 80
percent of Brazil's oil output.
    Chevron has previously drilled for subsalt depth targets in
the field, which is also owned by Brazil's state-controlled
energy giant Petrobras and Frade Japao, a Japanese
consortium. Chevron owns 52 percent of Frade, whereas Petrobras
owns 30 percent and Frade Japao 18 percent.Chevron has already been fined $28 million by Brazil's
environmental agency for the spill, an amount that is sure to
rise sharply when the ANP and Rio's state government slap fines
on the company, as they have pledged to do.
    Chevron's CEO in Brazil, George Buck, told Brazilian
lawmakers on Wednesday that the company "acted as rapidly and
safely as possible" and "used all resources" to contain and
stop the flow of oil from the well.
    "We controlled the source in four days. We worked with
transparency and cooperation with the authorities of Brazil,"
Buck said. "Please understand that during those first days it
was very confusing, very difficult to manage the flow of
information."
    The ANP said the suspension will remain in place until
Chevron fully restores safety conditions in the field.
    The Frade leak, while small, is likely to provide more
ammunition for the growing worldwide opposition to offshore
drilling in the wake of the estimated 4-million-barrel BP
Deepwater Horizon spill in the U.S. Gulf in 2010.
    Chevron is also a 30 percent partner in the nearby $5.2
billion Papa-Terra project. Petrobras is the operator in Papa
Terra.
    Chevron, Petrobras and Frade Japao produce about 79,000
barrels a day of oil in Frade. Petrobras and Chevron expect to
produce about 140,000 barrels of oil and equivalent gas from
Papa-Terra in 2013.
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