Brazil suspends Chevron's drilling permission

AP News
Posted: Nov 23, 2011 4:54 PM
Brazil suspends Chevron's drilling permission

Chevron was banned from drilling for oil in Brazil until an investigation into an offshore oil leak at one of the U.S.-based oil company's well sites is completed, regulators said Wednesday.

The board of Brazil's National Petroleum Agency met and "ordered the suspension of drilling activities" until it can identify the causes and who is responsible for the leak of more than 110,000 gallons of oil into the Atlantic ocean off the nation's southeastern coast.

"This resolution suspends all drilling activity for Chevron Brasil Ltda. in national territory," the statement read.

It was not clear how long the suspension would last.

Chevron said in an emailed statement that it would "follow all the rules and regulations of the Government of Brazil and its agencies."

Oil started leaking at the site of a Chevron appraisal well on Nov. 7, about 230 miles (370 kilometers) off the northeastern coast of Rio de Janeiro state.

The agency said on Tuesday that the leak was now "under control."

The work at the Frade field where the leak took place is one of Chevron's "biggest capital investments," according to the company's website, though details are not provided.

George Buck, chief operating officer for Chevron's Brazilian division, has said the spill occurred because Chevron underestimated the pressure in an underwater reservoir.

He said earlier this week that this caused crude oil to rush up a bore hole and eventually escaped into the surrounding seabed. The oil has leaked through at least seven narrow fissures on the ocean floor, all within 160 feet (50 meters) of the wellhead.

The leak is a test for Brazil as huge offshore oil finds have been announced recently, with estimates that they could hold at least 50 billion barrels of oil.

Brazil's Environment Ministry has fined Chevron nearly $28 million, but has said the company could face five or six times that in future penalties. Chevron has not indicated if it will contest the fine in court, which it can do under Brazilian law.

The company came under withering criticism from officials at the ministry and also the regulatory agency for not fully sharing information about the spill in its early days, and of not having the proper emergency equipment on hand to deal with the spill.

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Chevron Corp. officials have accepted responsibility for the spill but adamantly reject those accusations.

The oil slick on the ocean surface that resulted from the leak has significantly declined, officials said, dropping to less than 0.78 square miles (2 square kilometers).

George Buck, chief operating officer for Chevron's Brazilian division, appeared before the lower house of Brazil's Congress on Wednesday. He repeated that the company takes full responsibility and he apologized to the Brazilian government and nation.

Carlos Minc, the environment minister for Rio de Janeiro state, has harshly criticized Chevron, telling foreign reporters in Rio that Brazil's laws "allow foreign companies to explore in our waters, we welcome anyone as long as they respect our laws."

"But we are also not a banana republic. If a company violates Brazilian law and the concession terms ... they should go to jail and lose all their exploration rights. We want to be treated with the dignity we deserve as the world's seventh-largest economy."


Associated Press Television News producer Flora Charner contributed to this report from Rio de Janeiro.