Brazil regulator says Chevron could have avoided spill

Reuters News
Posted: Jul 19, 2012 3:56 PM
Brazil regulator says Chevron could have avoided spill

By Sabrina Lorenzi

RIO DE JANEIRO (Reuters) - Chevron Corp. could have avoided a November oil spill of 3,700 barrels into the Atlantic Ocean off Brazil's coast had it interpreted geological data better and followed industry safety practices more closely, the director of the national oil regulator said on Thursday.

After months of investigation, the regulator, known as the ANP, released its final report on the spill in the so-called Frade field east of Rio de Janeiro. The spill was the result of a drilling accident when a pressure build-up fractured the rock surrounding a Chevron oil well.

The report, presented by ANP Director Magda Chambriard, will be the basis of fines Brazil will levy against Chevron, the No. 2 U.S. oil company. Chambriard said the fines would be announced within 30 days.

Earlier this week, she said fines would not surpass 50 million reais ($25 million). But the report could also be used in civil and criminal cases filed against Chevron and Transocean Ltd., its drilling contractor, after the spill.

Prosecutors in those cases are seeking as much as $20 billion in damages, as well as possible jail sentences against 17 executives at the two companies.

Chevron, issued a statement disputing several of the ANP's findings. The company said it spilled only 2,400 barrels of oil and disagreed "with the report's characterization of our safety culture."

Chevron added: "We are confident that at all times during the Frade incident we acted appropriately and responsibly."

The report said Chevron failed to interpret geological data appropriately. Chambriard said the data showed the rock structure around the well was too weak to contain pressure imparted by the oil reservoir below.

Better evaluation, she said, would have led Chevron not to drill there in the first place.

"The accident could have been avoided if Chevron had carried out its operations in full compliance with regulation, using good industry practices and following its own safety procedure manual," the report said.

The company was then two days late to perceive the leak once the well wall broke, the report said. Proper consideration of pressure and the weak rock structure, it added, should have led Chevron to reinforce the well more than it had.

The ANP, repeating comments by Chambriard earlier this week, said it sees no reason why Chevron cannot now resume production at its existing facilities at the Frade field, where it halted activities in March.

But the company, it warned, cannot resume drilling or water injection until it convinces regulators it can do so safely. Water injection is a process used to lift oil from reservoirs.

Though Chevron successfully shut down the well where the accident occurred, about 20 liters of residual oil per day is still leaking from the ocean floor, the ANP said.

Transocean, hired by Chevron to drill the well, was not faulted by the agency in the report.

"We are encouraged that the ANP report does not appear to fault our crew, equipment, or performance," said Guy Cantwell, a Transocean spokesman. "We are also looking forward to a rapid resolution of all legal matters associated with the Frade Field." (Additional reporting and writing by Reese Ewing in Sao Paulo; Editing by Gerald E. McCormick and David Gregorio)