Brazil Oil Spill: No More Drilling

Friday, August 3, 2012 @ 03:08 PM gHale

Chevron and Transocean have 30 days to suspend all petroleum drilling and transportation operations in Brazil until officials complete investigations into two oil spills off the coast of Rio de Janeiro.

The Brazilian federal court said in a statement Wednesday on its website that each company will receive a fine of 500 million reals, or about $244 million, for each day they fail to comply with the order.

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About 155,000 gallons of oil crude began seeping from cracks in the ocean floor at the site of a Chevron appraisal well in November. Chevron has placed the amount of oil that leaked at 110,000 gallons.

Two weeks later, the National Petroleum Agency said the seepage was under control. But in March, oil again started leaking and Chevron voluntarily suspended production in the field.

“Two environmental accidents in the space of just four months and the lack of equipment needed to identify the origin of the leaks and contain them, shows that the two companies do not have the conditions necessary to operate the wells in an environmentally safe manner,” Judge Ricardo Perlingeiro said in his ruling.

Chevron said it planned to appeal the court’s decision.

“Chevron Brasil is confident that at all times it acted diligently and appropriately,” the statement said, adding the company’s “response to the incident was implemented according to the law, industry standards and in a timely manner. The source of the leak was contained in four days.”

Petroleum agency head Magda Chambriard said last month the November spill involved about 25 safety infractions for which Chevron will be fined up to 50 million reals, or about $25 million, the maximum under Brazilian law.

Chevron said it underestimated the pressure in an underwater reservoir, causing crude to rush up a bore hole and escape into the surrounding seabed about 230 miles off Rio de Janeiro. The oil seeped from at least seven narrow fissures on the ocean floor, all within 160 feet of the wellhead. No oil reached shore.

Chevron “was not able to correctly interpret the geology and local fluid dynamics” of the reservoir when the leak occurred, according to the petroleum agency. It blamed Chevron’s water-injection practices for the reservoir pressure.

Earlier this year, Brazilian authorities banned Chevron from any new drilling or water-injection activities at working wells in the country.

In April, a Brazilian prosecutor filed an $11 billion lawsuit against Chevron and Switzerland-based Transocean for the leak in November and the one in March, saying they caused environmental damage. Prosecutors also that Chevron be temporarily prohibited from sending any profits made in Brazil outside the country.

A month before that lawsuit, federal prosecutors filed criminal charges against 17 Chevron and Transocean executives accusing them of environmental crimes, of misleading the petroleum agency about safety plans and of not providing accurate information after the spill. The charges carry a maximum penalty of 31 years in prison.

Judges must still decide if the cases will go to trial, which would be a lengthy process considering the number of defendants, the case’s complexity and the Brazilian legal system’s room for appeals.

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