RIO DE JANEIRO, (Reuters) – Brazil’s government ordered Chevron Corp yesterday to shut one of its wells in an offshore field where the oil company has come under intense scrutiny following an accident at another well that spilled thousands of barrels of oil.
The decision by the ANP oil regulator followed last month’s accident in the same area, which spilled about 2,400 barrels of oil into the ocean.
The second-largest U.S. oil company was fined $28 million – a figure that could at least triple -, had its local chief executive hauled in front of Congress and then had its Brazilian drilling rights suspended as punishment for the undersea leak.
ANP director Magda Chambriard said yesterday the agency has ordered Chevron to shut down a well in the Frade offshore field, where last month’s accident occurred, because the firm had failed to report the presence of sulfur from the well.
The burning of fuels made from oil and natural gas containing sulfur can create dangerous gases such as sulfur dioxide which can harm humans and the environment.
The ANP does not ban the production of sulfur but requires firms to have a prevention plan and to inform authorities of what is done with the material, Chambriard said.
“Companies have to report the risks they are facing and show that they are being controlled and minimized,” she told a news conference in Rio de Janeiro.
She said Chevron would receive another fine for the offense, but did not specify the amount. Chevron officials in Brazil were not immediately available for comment.
Chevron, which has taken full responsibility for the relatively small spill, last month capped and abandoned the evaluative well that ruptured in the same field and caused the accident.
The spill is likely to increase politicization of the governance of the country’s oil sector, which has already shifted to a more state-centered approach since the discovery of huge reserves off the Rio coast in recent years.
It has led to concern that Chevron could be excluded from future opportunities in the offshore fields and has already given ammunition to Rio state lawmakers fighting proposals to share more oil wealth with non-producing states.
The Nicaragua-sized “subsalt” area, which includes the Frade concession, may hold 100 billion barrels of oil or more, according to a study from the National Oil and Gas Institute.
Brazil’s government sees the fields as a ticket to developed status that could make it the world’s third or fourth biggest oil producer by 2020, but it faces huge technological and financial challenges to tap the ultra-deep reserves.
Chevron owns 52 percent of Frade, while Brazil’s state-run oil company Petrobras owns 30 percent and Frade Japao 18 percent. Frade has 10 production wells, including the one ordered closed on Thursday, and produces 79,000 barrels per day of oil, or 4 percent of the country’s output.
