BRASILIA, (Reuters) – The Brazilian government yesterday suspended Chevron Corp’s drilling rights in Brazil until it clarifies the causes of an offshore oil spill, the latest twist in a political firestorm threatening the U.S. company’s role in Brazil’s oil bonanza.
The decision was announced as the chief executive of Chevron’s Brazilian unit testified before the Brazilian Congress, where he publicly apologized for the Nov. 8 spill that leaked about 2,400 barrels of oil into the ocean off the coast of Rio de Janeiro.
Brazil’s National Petroleum Agency said it decided to halt Chevron’s drilling rights after determining that there was evidence that the company had been “negligent” in its study of data needed to drill and in contingency planning for abandoning the well in the event of accident.
The agency, known as ANP, also rejected a request from Chevron made before the leak to drill wells in the deeper subsalt areas in the Frade field where the spill occurred. The field is located in the oil-rich Campos Basin and is the only block in Brazil where Chevron produces oil as the operator.
The Campos Basin is currently the source of more than 80 percent of Brazil’s oil output.
The spill is an ominous reminder of the risks involved in offshore drilling, cooling the euphoria over vast subsalt oil reserves Brazil found in 2007 up to 7 km (4.4 miles) below the seabed. The country is banking on those reserves of up to 100 billion barrels to speed its development. Chevron has previously drilled for subsalt depth targets in the field, which is also owned by Brazil’s state-controlled energy giant Petrobras and Frade Japao, a Japanese consortium. Chevron owns 52 percent of Frade, whereas Petrobras owns 30 percent and Frade Japao 18 percent.
The second-largest U.S. oil company has already been fined $28 million by Brazil’s environmental agency for the spill, an amount that is sure to rise sharply when the ANP and Rio’s state government slap fines on the company, as they have pledged to do.
Chevron had halted all of its local drilling operations after the leak occurred, before ANP’s announced suspension. The ANP said the suspension will remain in place until Chevron fully restores safety conditions in the field.
Chevron’s CEO in Brazil, George Buck, told Brazilian lawmakers on Wednesday that the company “acted as rapidly and safely as possible” and “used all resources” to contain and stop the flow of oil from the well.
“We controlled the source in four days. We worked with transparency and cooperation with the authorities of Brazil,” Buck said.
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Some lawmakers scoffed at Chevron’s claim that it did not initially realize the spill, when first detected, was linked to its own nearby well that it rushed to shut off after a pressure surge or “kick” a day before the oil spill was spotted.
Chevron at first attributed the “sheen” on the sea surface to naturally occurring seepage from the seabed. The company is being investigated by the Federal Police, which noted discrepancies between Chevron’s account of the spill and the government’s.
The Frade leak, while small, is likely to provide more ammunition for the growing worldwide opposition to offshore drilling in the wake of the estimated 4-million-barrel BP Deepwater Horizon spill in the U.S. Gulf in 2010.
The oil flow has now been staunched except for residual droplets still bubbling up from a fissure in the sea floor but this is expected to cease in a few days. Chevron said the oil “stain” on the sea surface now equated to about a barrel.
Most of the oil has been mechanically dispersed while 350 cubic meters of oily water has been recovered and will undergo processing.
Addressing a crowded congressional commission through an interpreter, Buck said Chevron still did not understand how the crude rose 567 feet (173 meters) up to the seabed after rock “parted” while drilling an the 8.5 inch-wide (22 cm) column.
“We have an ongoing investigation. We will share the lessons learned with the people of Brazil to ensure that this never happens here or anywhere else in the world,” Buck said.
