Brazil says Chevron oil leak larger than estimated

Brazil regulator says Chevron's offshore oil leak larger than estimated, fines to be levied

Associated Press

RIO DE JANEIRO (AP) -- An investigation by regulators found that Chevron Corp. could have prevented an offshore oil leak last year and that the spill was larger than previously estimated, the head of Brazil's National Petroleum Agency said Thursday.

Magda Chambriard, who runs the agency known as ANP, said at a news conference that about 155,000 gallons seeped into the ocean from cracks in the seabed floor near a Chevron well in the Frade field. Previous estimates put the leak at about 110,000 gallons, which a Chevron statement said is the figure it sticks by.

The ANP's full report will be released Friday. It will show "the accident could have been avoided if Chevron had conducted its operations while fully adhering to the regulations of the ANP and industrywide best practices, as well as its own procedure manual," Chambriard said.

She added that the agency would fine Chevron about the maximum allowed under Brazilian law, upward of $25 million. Chevron and driller Transocean Ltd. are facing an $11 billion lawsuit that a federal prosecutor filed earlier this year.

"We disagree with the report's characterization of our safety culture," Chevron's statement read. "We are confident that at all times during the Frade incident we acted appropriately and responsibly."

The crude began seeping from cracks in the ocean floor near a Chevron well in November. Two weeks after the leak, the ANP said the seepage was under control. But in March, oil again started leaking and Chevron voluntarily suspended production in the field.

Chevron, based in San Ramon, California, said after the November leak that it had underestimated the pressure in an underwater reservoir, so crude rushed up a bore hole and eventually escaped into the surrounding seabed some 230 miles (370 kilometers) off the coast of Rio de Janeiro. The oil seeped from at least seven narrow fissures on the ocean floor, all within 160 feet (50 meters) of the wellhead. No oil reached Brazilian shores.

The leak paled in comparison with the 2010 spill from a BP PLC well in the Gulf of Mexico, which at its peak spewed more than 2 million gallons (7.5 million liters) a day. Brazil also has had bigger oil spills than Chevron's.

In 2000, crude spewed from a broken pipeline at the Reduc refinery in Rio de Janeiro's scenic Guanabara Bay, spewing at least 343,000 gallons into the water. Just a few months later, more than 1 million gallons of crude burst from a pipeline operated by the state-controlled Petrobas oil company into a river in southern Brazil. Brazil's worst oil disaster was in 1975, when an oil tanker from Iraq dumped more than 30 million gallons into Rio's bay.

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

"For the moment, in order for Chevron to drill, it must prove to the ANP that it will be doing so in an absolutely safe way, recognizing its errors and mitigating those errors. ... We need to avoid the possibility of another accident," Chambriard said.

Chevron has said it followed all laws and best practices while drilling offshore, but the ANP said Thursday that its investigation found the company at fault.

An ANP emailed statement said the investigation determined Chevron "was not able to correctly interpret the geology and local fluid dynamics" of the reservoir when the leak occurred. It blamed Chevron's water-injection practices for the reservoir pressure.

The ANP also said that Chevron "dismissed" test results from drilling three other wells in the same area that "indicated the necessity to change the project" and that the company "contradicted its own manual" by not using enough pressure while drilling an exploratory well.

The regulator said further that Chevron didn't respond properly once the leak began.

"Despite strong indications of an underground blowout, Chevron was slow in acknowledging the situation, resulting in the initial adoption of ineffective methodology to control the well," the ANP email said. "If Chevron had identified the underground blowout immediately, the volume of oil released into the sea would have been significantly lower."

The company disagreed.

"Chevron Brasil's rapid response to the November incident brought the well under control in four days. ... The well was successfully plugged and abandoned. We have and will continue to engage openly and transparently with all Brazilian authorities and regulatory agencies," the company's statement said.

In April, a Brazilian prosecutor filed an $11 billion lawsuit against Chevron and the Switzerland-based Transocean for both the leak in November and the one in March, alleging they caused environmental damage. Prosecutors also asked 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 ANP about safety plans and of not providing accurate information in the wake of the spill. The charges carry a maximum penalty of 31 years in prison.

Last week, however, federal police in Rio de Janeiro said their investigation into the oil leak, which was carried out because of the court cases, found that the spill caused no significant environmental damage.

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

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Associated Press writer Bradley Brooks in Sao Paulo contributed to this report.

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