Posted on 15 Dec 2011
A Brazilian federal prosecutor on Wednesday asked a judge to shut down all Chevron Corp. and Transocean Ltd. operations in Brazil in a lawsuit that seeks some 20 billion Brazilian reais ($11 billion) in damages from the companies, the latest legal broadside to the firms since oil leaked from a well they operate in early November.
In a statement announcing the lawsuit, the prosecutor's office in Campos, a city in Rio de Janeiro state, said Chevron and Transocean "showed a lack of planning and environmental management," by allowing the leak, which authorities say allowed at least 2,400 barrels to flow into the ocean.
Chevron said Wednesday it hadn't received any formal notice of the lawsuit. It said it responded "responsibly" to the spill, and that the flow of oil was stopped within four days. Chevron said there's now less than a single barrel of oil on ocean surface, and that there hasn't been any coastal or wildlife impact.
Experts on Brazil's oil industry say the companies are unlikely to be shut down or pay the enormous damages sought in the lawsuit. Brazilian prosecutors have seldom succeeded when seeking to shut down companies in past environmental lawsuits. All the same, the lawsuit adds a new level of complications for Chevron, and underscores the highly charged political environment gathering around the Brazilian deep-water oil.
"Unhappily, oil has become political; every prosecutor wants to get on television, and so we get absurd lawsuits like this," said Adriano Pires, director the Brazilian Infrastructure Center, a Rio de Janeiro firm that consults on oil and other energy projects. "Nothing is going to happen to Chevron. But what will happen is that it will scare investors; Brazil loses credibility, and the cost of investment goes up."
The Nov. 7 drilling accident caused an oil spill at an appraisal well at the Frade oil field, located in deep Atlantic waters off the coast of Rio de Janeiro state. Brazilian authorities levied fines and ordered the firm to stop all drilling—but have allowed Chevron to continue pumping some 79,000 barrels per day from its other existing wells.
In a Dec. 1 interview with The Wall Street Journal, Ali Moshiri, who runs Chevron's Latin American and African operations, said the "overreaction is puzzling us."
The leak came at a crucial moment for Brazil's oil industry, which is preparing to start developing huge oil fields discovered deep below the Atlantic seabed. They contain some of the largest reservoirs of oil and gas discovered anywhere in the world in the last two decades.
Brazil represents about 3% of Chevron's world-wide assets, compared to 17% for Australia and 21% for the U.S. Gulf of Mexico, according to a Deutsche Bank research note.
But the South American country's offshore riches make Chevron's Brazilian assets a strategically important toehold, and the firm has previously challenged the Brazilian response to the spill.