EXCLUSIVE-UPDATE 2-Chevron Brazil ban ended, marks restart step

Sat Dec 1, 2012 7:04am IST

Stocks

   

* Court paves way for restart of Chevron output in Brazil
    * Companies accept "change-of-conduct accord" -prosecutor
    * Changes to safety, operating procedures follow 2011 spill

 (Adds original prosecutor's outlook for case)
    By Jeb Blount
    RIO DE JANEIRO, Nov 30 (Reuters) - Chevron Corp 
received a boost to its efforts to restart oil output in Brazil
after a court overturned a ban on its operating in the country
and the company agreed on a plan to improve safety procedures
after an oil spill last year.
    Taken together, the moves suggest the case may be coming to
a quick, negotiated resolution, said Eduardo Santos de Oliveira,
the federal prosecutor from the city of Campos de Goytacazes who
had first filed civil and criminal lawsuits in the case.
    Chevron, the No. 2 U.S. oil company, and its drilling
contractor Transocean Ltd face up to $20 billion in
damages and some of their executives face jail terms of up to 31
years in the largest environmental prosecution in Brazil's
history.
    Chevron's operational ban in Brazil was overturned by
Guilherme Dienthaeler, a federal appeals court judge in Rio de
Janeiro, court press officials told Reuters on Friday. Details
of the ruling are unlikely until next week, they said.
    The civil case had been taken away from Oliveira and moved
earlier this year to Rio de Janeiro. He believes his colleagues
are seeking a quick settlement and that they have accepted
regulators' arguments that his proposed penalties are too harsh
for the size and nature of the spill and could scare off
investment in one of the world's fastest-growing oil frontiers.
    "I'm disappointed. It looks like it's moving to a negotiated
solution," Oliveira said in a phone interview. "I'm afraid we
will lose the chance to apply a giant fine and the good that
will do for preventing environmental crime."
   
 
    A ban on operations in Brazil by Transocean, the world's
largest offshore oil drilling rig operator, was overturned in
September. 
    Prosecutors had won injunctions banning Chevron and
Transocean in July, seeking to assure payment of the nearly $20
billion penalties sought for alleged environmental damage from a
the 3,600-barrel spill in the Frade Field northeast of Rio de
Janeiro in November 2011.
    As long as the ban held, Brazil's oil regulator, the ANP,
said it would be unable to consider a petition to restart oil
output in Frade. The ban stood even though Chevron accepted a
July report criticizing its drilling plan, along with fines of
more than $16 million. 
    In a related development, Chevron and Transocean agreed to a
plan to change offshore safety and operating procedures, a
spokeswoman for federal prosecutors told Reuters on Friday.
    If a final agreement is reached after public consultations,
the plan will be presented to the federal judge hearing the
suit. That could help the companies by showing their willingness
to improve Brazil's oil industry, the prosecutors' office in Rio
de Janeiro said.
    
    CONDUCT-CHANGE ACCORD
    The agreement, known as a "change-of-conduct accord," was
drafted at the request of Chevron and Transocean with the same
federal prosecutors handling the civil case, the prosecutors'
office said.
    It declined to give details of the accord but said they
would be presented at a public hearing on Dec. 14 in Rio de
Janeiro by federal prosecutor Gisele Porto.
    Porto is lead prosecutor on the civil lawsuits against
Chevron and Transocean for the spill in Frade.
    "Such negotiations usually indicate the desire of a
prosecutor to resolve the case quickly," Oliveira said. 
    Chevron's press office at its headquarters in San Ramon,
California, confirmed the ban had been overturned, but gave no
further details and declined to comment on the change-of-conduct
accord.
    Transocean's press officer in Houston declined to comment.
Both companies say they committed no crime and acted correctly
during and after the spill.
    No one was hurt in the Frade accident. No oil reached shore,
and there was no discernable environmental damage, according to
Brazil's petroleum regulator, the ANP.
    Still, Oliveira says the spill was one of the worst
environmental disasters in Brazil's history. 
    The Frade field was producing 62,000 barrels of oil per day
when it was shut in March to examine unexplained leaks in the
area around the site of the November 2011 spill. Tests
determined that the leaking oil was not from Chevron's
reservoirs.
    Frade is operated by Chevron, which also owns 52 percent of
the field. Brazil's state-led Petrobras owns 30
percent, and Frade Japão, owned by Japanese trading houses
Sojitz Corp and Inpex Corp, has an 18 percent
stake. Neither Petrobras nor Frade Japão is the subject of
spill-related prosecutions.
    Chevron, Transocean and 17 of their employees and executives
also face criminal charges that can carry financial penalties
and jail terms of up to 31 years.
    The Frade spill was far less severe than other recent
offshore accidents. More than 5 million barrels of oil were
spilled in the 2010 Deepwater Horizon disaster in BP Plc's
 Macondo field in the Gulf of Mexico. Eleven people died
in the accident, and beaches and fishing grounds were polluted.
 
    On Nov. 15, BP agreed to pay a record $4.5 billion in
penalties and plead guilty to criminal misconduct for the
disaster.
    While criticizing some of Chevron's actions and levying 35.1
million reais ($16.6 million) in fines on the company, the ANP
said in a July report that there was no negligence in the 2011
spill. It also said Transocean had no responsibility for the
spill. 
    Both Chevron and Transocean have said they will challenge
the civil and criminal cases against them. Chevron shares fell
0.1 percent in New York on Friday to $105.69.

 (Reporting by Jeb Blount; Editing by Kieran Murray, John
Wallace, Andrew Hay and Leslie Adler)
Comments (0)
This discussion is now closed. We welcome comments on our articles for a limited period after their publication.

  • Most Popular
  • Most Shared

REUTERS SHOWCASE

RBI Policy Review

RBI Policy Review

RBI keeps rates on hold, warns on inflation  Full Article 

China iPhone Sale

China iPhone Sale

China regulator approves Apple's iPhone 6 for sale in China  Full Article 

Cleanliness Drive

Cleanliness Drive

Modi orders officials to clean loos on Gandhi's birthday.  Full Article 

Bid to Boost Trading

Bid to Boost Trading

RBI takes small steps to deepen markets.  Full Article 

Car Recall

Car Recall

Maruti Suzuki says to recall 69,555 cars.  Full Article 

China Factory Data

China Factory Data

China final HSBC PMI steady in September on stronger global demand but risks remain  Full Article 

Oil Demand

Oil Demand

India's thirst for oil grows even as China cuts back  Video 

EBay Divests PayPal

EBay Divests PayPal

EBay to spinoff PayPal in 2015  Full Article 

Reuters India Mobile

Reuters India Mobile

Get the latest news on the go. Visit Reuters India on your mobile device.  Full Coverage