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The Transocean Development Driller III, right, works to drill the primary relief well at BP PLC's Macondo well in the Gulf of Mexico. Transocean was also involved in the Chevron spill off Brazil's coast. (Derick E. Hingle/Derick E. Hingle/Bloomberg)
The Transocean Development Driller III, right, works to drill the primary relief well at BP PLC's Macondo well in the Gulf of Mexico. Transocean was also involved in the Chevron spill off Brazil's coast. (Derick E. Hingle/Derick E. Hingle/Bloomberg)

Brazil fines Chevron $28-million for oil spill Add to ...

Brazil’s government slapped Chevron Corp. with a $28-million (U.S.) fine on Monday for causing an oil spill off Brazil’s coast, a penalty that could rise to $44-million as the U.S. company faces a mounting political backlash over the accident.

The leak from the undersea well, owned in partnership with Brazil’s state-controlled Petrobras and a Japanese consortium, had slowed to a “residual” flow and was not a “major” disaster, said Haroldo Lima, the head of the ANP agency, Brazil’s energy regulator.

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At its height, the leak released 200 to 330 barrels a day into the ocean following a rupture in the well’s structure on Nov. 7, according to the ANP. Chevron said on Monday that the leak spilled 2,400 barrels of oil into the ocean, while some government estimates put the spill at about 5,000 barrels

“There is no comparison with the Macondo spill in the Gulf where 3,000 barrels a day leaked and 11 people died. This is a serious accident but not a major one,” Mr. Lima told reporters, referring to last year’s disaster at BP’s Macondo well.

Brazil’s environment agency said later that it would fine the company, which has admitted responsibility for the accident, 50 million reais ($28-million). Rio could impose an additional 30 million reais in fines, the state’s Environment Secretary said.

While agencies say they are fining Chevron for the spill, Brazilian law holds that all partners in the field are “jointly and severally” responsible for operations, said Marilda Rosado de Sa Ribeiro, a Brazilian oil law specialist and partner at the Rio de Janeiro legal firm Doria Jacobina Rosado Godinho.

Partners in such fields usually sign contracts dividing such liabilities between them based on their ownership of the field. Chevron, the operator, owns 52 per cent, Petrobras 30 per cent and Frade Japao 18 per cent.

Despite the relatively small size of the leak, Chevron is facing political and regulatory fallout over the accident, which has raised questions about safety and environmental risks in Brazil’s growing offshore industry at a time when states are quarrelling over royalty revenues.

Federal police are investigating the spill, and the oil major was summoned on Monday to explain it to a congressional committee. President Dilma Rousseff will discuss the oil spill, which authorities estimate at about 3,000 barrels, in a meeting later on Monday with her environment and energy ministers.

Brazilian oil companies expect to produce about seven million barrels of oil a day by 2020, most of it from offshore near Rio de Janeiro, an amount that could make Brazil the third-largest oil producer after Russia and Saudi Arabia.

The so-called subsalt region is the size of New York state and is believed to hold more than 50 billion barrels that could help power Brazil’s drive to developed-nation status. But its development comes at a time when opposition to offshore drilling is growing worldwide in the wake of the BP Deepwater Horizon spill.

Chevron Brazil’s CEO George Buck said at a news conference in Rio on Sunday that the company takes full responsibility for the accident and intends to fully clean up the spill.

He said the company had underestimated the amount of pressure in the offshore oil reservoir being targeted and overestimated the strength of undersea rock through which they were drilling.

As a result, high-pressure oil was able to leak into the well borehole, overcoming a liquid sealant and well-cleaning fluid known as “mud.” Because of the low pressure estimate, the mud was mixed “too light” to keep the oil under control.

The well structure cracked and oil seeped through rock to the sea floor. From there, it bubbled more than a kilometre up to the ocean surface.

The company says the “sheen” on the ocean surface caused by the leak now totals about 18 barrels and is 120 kilometres off the Rio coastline, moving further out to sea.

Chevron has come under criticism in Brazil for failing to provide an immediate explanation for the spill and for not initially offering a clear estimate of how much oil has leaked into the ocean.

Rio state’s Environment Secretary, Carlos Minc, said Rio might cancel firms’ operating licenses, including that of Transocean, which drilled the well for Chevron and also owned the drilling rig involved in the Deepwater Horizon disaster.

But Brazil’s Environment Ministry said Transocean’s licenses were issued by the federal government and that there had been no decision to cancel them. Mr. Lima also said such a decision could not be taken by Rio.

“The state government does not have the power to stop Transocean from operating,” he said. “I doubt the state government can do this. It is the job of the ANP.”

The accident comes as Rio and other producer states campaign bitterly against a proposal in Congress to distribute oil royalties more widely among states. An agreement on the royalties is needed before Brazil can launch a new legal framework for development of the reserves.

One of Rio’s main arguments for keeping a bigger share is that it would have to shoulder the costs of any environmental disasters.

“This incident could have been avoided. Rio will in no way be a stage for environmental impunity,” Mr. Minc told GloboNews television channel.

Reuters

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