* Prosecutors sought $18 billion, settled for $135 million
* Spill caused no discernable damage to environment -ANP
* Frade field output fell 36 pct in August from July
By Jeb Blount
RIO DE JANEIRO, Oct 1 (Reuters) - A Brazilian federal judgeon Tuesday dismissed a lawsuit against No. 2 U.S. oil companyChevron Corp after approving a negotiated settlement, adecision that closes a nearly two-year legal battle over an oilspill in November 2011.
Brazilian prosecutors sought 40 billion reais ($18 billion)in damages from Chevron and offshore drilling contractorTransocean Ltd for a 3,600-barrel leak in the Fradeoffshore oil field Chevron operates northeast of Rio de Janeiro.
Prosecutors also filed criminal charges against thecompanies and 17 of their employees. A judge rejected thosecharges, but prosecutors are appealing.
The dismissal came after Judge Raffaele Felice Pirro of thefederal court in Rio de Janeiro accepted an "adjustment ofconduct" deal with Chevron that commits the company to spendingabout 300 million reais ($135 million) in compensatoryactivities. Chevron and the government agencies that signed theaccord said Transocean had no responsibility for the spill.
The case, the largest-ever environmental lawsuit inBrazilian history, raised questions about the cost of doingbusiness in the nation's high-risk oil business and the abilityof prosecutors to assess proper penalties.
While the spill caused no discernible environmental damage,was dispersed within days, never came within 100 kilometers (62miles) of shore and resulted in no injuries, Chevron and itspartners had to stop producing for about a year and a half.Brazilian petroleum regulator ANP fined Chevron for failing tofollow drilling plans, but absolved the company of negligence.
The damages sought were many times larger than those U.S.courts awarded plaintiffs against operator BP Plc in themuch larger 2010 Deepwater Horizon spill, which fouled beaches,damaged fisheries and killed 11 people in the Gulf of Mexico.
Chevron owns 52 percent of Frade and is the field operator.Brazil's state-run oil company Petroleo Brasileiro SA owns 30 percent and Frade Japão, a joint venture betweenJapanese trading companies Sojitz Corp and Inpex Corp, owns 18 percent. Petrobras, Sojitz and Inpex werenever named in the civil or criminal lawsuits.
Both Chevron and Transocean welcomed the decision in shortstatements from their press offices. Chevron added that 95.2million reais, or about a third of the initial settlement value,will be spent on social and environmental programs approved byprosecutors, the ANP and environmental protection agency Ibama.
Chevron will still have expenses for additional safetyequipment such as service boats in the Frade field. It will needto monitor and trap small oil seepages from the sea-floor, someof which might have nothing to do with the initial spill.
Frade produced 12,645 barrels of oil and equivalent naturalgas per day in August, 36 percent less than in July, and lessthan a fifth of 72,000 boepd at its peak just before the spill,the ANP said in its monthly report on Tuesday. Chevron's averageAugust share was 8,921 boepd.
Chevron shares fell 0.15 percent to close at $121.32 on theNew York Stock Exchange, its lowest since Sept. 6. Transoceanrose 1.08 percent to $44.98, the stock's biggest one-day gain inthree weeks.
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