Source: Dow Jones News Service, September 13, 2013
Posted on: http://envfpn.advisen.com
(FROM THE WALL STREET JOURNAL 9/14/13)
RIO DE JANEIRO — U.S. energy firm Chevron Corp. on Friday agreed to pay about $42 million to settle lawsuits related to an offshore oil spill in late 2011, much less than the $20 billion in damages that Brazilian federal prosecutors initially sought.
The deal closes a controversial chapter in Brazil’s oil industry just a few weeks before the country plans to sell rights to exploit one of the largest offshore oil fields ever discovered. The government is banking on oil investments to help shake Latin America’s largest economy out of a slump.
Prosecutors and local officials were criticized for the heavy-handed response to what was considered a relatively minor spill. As well as seeking huge damages, prosecutors filed criminal charges against Chevron, Transocean Ltd. and executives at the two companies, though the charges were eventually dropped. Transocean was operating the drilling rig at the Frade field off Brazil’s southeast coast in November 2011, when an accident caused between 2,400 and 3,700 barrels of crude to leak from the seabed.
The Chevron case had cast a shadow over the industry, and companies have expressed concerns about moves to extend state control over new discoveries. The government has also pushed oil firms to use locally produced goods and services, which they argue drives up costs.
Still, analysts said the country compares favorably to riskier parts of the world. “Your assets are not going to get expropriated in Brazil, and you are not going to have to weather military coups,” said Ford Tanner, a senior analyst at IHS Energy Insight.
The auction of the Libra offshore prospect, which is estimated to hold between eight billion and 12 billion barrels of recoverable crude oil, is set for Oct. 21. The sale is expected to generate interest from the Western oil companies, along with government-owned companies.
Brazilian regulator ANP has estimated that as much as 400 billion Brazilian reais ($174 billion) will have to be invested to develop Libra over the 35-year period of the contract.
Libra is one of the so-called presalt oil deposits discovered since 2007 that could put Brazil among the world’s top 10 oil producers in coming years. Billions of barrels of crude were discovered in 2,000 meters (6,600 feet) of water off the country’s southeast coast, buried beneath more than 5,000 meters of sand, rocks and a thick layer of salt — hence ” presalt.”
The settlement amount for the Frade field spill fell after local oil and environmental regulators concluded that the damage wasn’t as bad as originally thought, Gisele Porto, the government’s prosecutor, told reporters Friday. The payment will be used to fund environmental projects, Ms. Porto said.
Chevron has already paid a fine of $18.6 million to environmental regulator Ibama and $11.1 million to Brazil’s National Petroleum Agency, according to the agreement. Transocean was previously cleared of any charges.
“The settlement represents an amicable resolution to the civil suit brought against us,” Rafael Jaen Williamson, Chevron’s corporate-affairs director, said.
The agreement will be presented to a judge, who can either approve or reject it but can’t alter the financial amounts, Ms. Porto said.
Chevron restarted crude oil production at the field in April, and is now producing about 16,000 barrels a day there, Mr. Williamson said.