Brazil fines Chevron a further $5.4 million for spill

Reuters News
Posted: Dec 23, 2011 6:53 PM
Brazil fines Chevron a further $5.4 million for spill

SAO PAULO (Reuters) - Brazil's environment inspector fined Chevron Corp 10 million reais ($5.4 million) for breaching the terms of the U.S. oil company's environmental license when tackling an offshore spill at a well it drilled in November.

The fine on Friday is on top of a 50 million reais charge the inspector, Ibama, slapped on Chevron for causing the spill at the Frade field when rock gave way due to a pressure surge. Chevron estimates 2,400 barrels of oil spilled into the sea.

The fines pale into insignificance against the $11 billion lawsuit Rio de Janeiro state prosecutors are trying to bring against the company for a spill analysts consider fairly minor and which never reached the country's shores.

That action has raised concerns that unpredictable regulatory oversight could deter big oil companies from investing in Brazil just as it starts to tap vast new oil reserves of up to 50 billion barrels discovered in 2007.

Brazil's so-called subsalt reserves lie about 7 km (4.4 miles) under the sea, making them technically challenging to reach and thus carrying potentially greater risk of accidents.

Ibama said the latest fine was for Chevron's failure to adhere to the Individual Emergency Plan set out in the environmental license it needs to operate. Ibama said Chevron lacked necessary equipment and was slow to respond to the leak.

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Federal police have also recommended the indictment of several officials from Chevron and rig contractor Transocean for environmental crimes and withholding information from investigators.

Transocean issued a statement late on Friday detailing some of these events and reminding investors that its contract for the Sedco 706 rig, which Chevron operated in Brazil, required the California-based oil company to indemnify Transocean for claims arising for pollution below the surface of the water.

(Reporting by Marcelo Teixeira in Sao Paolo and Braden Reddall in San Francisco; Writing by Peter Murphy; Editing by Dale Hudson and Bob Burgdorfer)