Chevron faces millions of dollars in fines for oil leak off Brazil

Oilspill

REPORTING FROM SAO PAULO -- Brazil's environmental agency says Chevron will be fined nearly $28 million for an oil spill at a well off the coast of Rio de Janeiro, which occurred as the country gears for one of the world's largest and most challenging deep-water oil exploration projects.

Officials said this week that an investigation into the leak, which began Nov. 7, is ongoing. Penalties against the company could rise to more than $140 million, and Chevron could be banned from participation in Brazil's upcoming “pre-salt” oil projects, they said.

Chevron took responsibility for the spill. But the government also accuses Chevron of mismanaging the cleanup and of presenting an evacuation plan which relied upon equipment that Chevron did not have in the country at the time, Brazil's National Petroleum Agency, or ANP, said late Tuesday (link in Portuguese).

The leak, which has already been largely contained, was small compared with last year's Gulf of Mexico oil spill, and Chevron currently has relatively limited operations in Brazil. But the leak is likely to prove an important reminder of the environmental risks the country faces in its plans to develop its newfound oil wealth, analysts say.

The discovery of the pre-salt reserves in 2007, so-called because they lie under a hard-to-penetrate layer of salt and rock deep below the ocean's surface, gave Brazil the chance to be an oil exporter in the ranks of Kuwait or Russia.

Last year Petrobras, the state-run oil company that will lead the drilling efforts, completed the largest share issuance in history to prepare for investments that will total up to $224 billion over the next five years.

“This is huge ... and from a geological and logistics perspective it is very challenging,” Erasto Almeida, a Latin America energy analyst at Eurasia Group in New York, said in an interview. “We assume the risks of accidents are considerable.”

“The government's strong reaction to the spill is clear indication not only that they are irritated with Chevron for what they perceive as inefficient action, or because the company didn't share all information,” Almeida said, “but also that they are concerned about the risk of new accidents in the sector.”

Chevron has said it “continues to fully inform and work with Brazilian government agencies and industry partners.”

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-- Vincent Bevins

Photo: An aerial view shows oil that seeped from a well operated by Chevron in waters off Rio de Janeiro state on Friday. Credit: Reuters

 

 

 
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