The Brazilian government on Wednesday suspended Chevron Corp’s drilling rights in Brazil until it clarifies the causes of an offshore oil spill, the latest twist in a political firestorm threatening the US company’s role in Brazil’s oil bonanza.
The decision was announced as Chevron Brazil chief executive George Buck testified before the Brazilian Congress, where he publicly apologized for the Nov. 8 spill that leaked about 2,400 barrels of oil into the ocean off the coast of Rio de Janeiro.
The Brazilian National Petroleum Agency (ANP) said it decided to suspend Chevron’s drilling rights after determining that there was evidence the company had been “negligent” in its study of data needed to drill and in terms of contingency planning for abandoning the well in the event of accident.
ANP also rejected a request from Chevron made, before the leak, to drill wells in the deeper subsalt areas in the Frade field where the spill occurred. The field is located in the oil-rich Campos Basin and is the only block in Brazil where Chevron produces oil as the operator.
The Campos Basin is currently the source of more than 80 percent of Brazil’s oil output.
The spill is an ominous reminder of the risks involved in offshore drilling, cooling the euphoria over vast subsalt oil reserves Brazil discovered in 2007 up to 7km below the seabed. The country is banking on those reserves of up to 100 billion barrels to speed its development.
Chevron had previously drilled for subsalt depth targets in the field, which is also owned by Brazil’s state-controlled energy giant Petrobras and Frade Japao, a Japanese consortium. Chevron owns 52 percent of Frade, whereas Petrobras owns 30 percent and Frade Japao 18 percent.
The second-largest US oil company has already been fined US$28 million by Brazil’s environmental agency for the spill, an amount that is certain to rise sharply when ANP and Rio’s state government slap fines on the company, as they have pledged to do.
Chevron halted all of its local drilling operations after the leak occurred, before ANP’s announced suspension. ANP said the suspension will remain in place until Chevron fully restores safety conditions in the field.
Buck, told Brazilian lawmakers on Wednesday that the company “acted as rapidly and safely as possible” and “used all resources” to contain and stop the flow of oil from the well.
“We controlled the source in four days. We worked with transparency and cooperation with the authorities of Brazil,” Buck said.
The Frade leak, while small, is likely to provide more ammunition for the growing worldwide opposition to offshore drilling in the wake of the estimated 4-million-barrel BP Deepwater Horizon spill in the US Gulf last year.
The oil flow has now been staunched except for residual droplets still bubbling up from a fissure in the sea floor but this is expected to cease in a few days. Chevron said the oil “stain” on the sea surface now equated to about a barrel.
Most of the oil has been mechanically dispersed while 350 cubic meters of oily water has been recovered and will undergo processing.
Addressing a crowded congressional commission through an interpreter, Buck said Chevron still did not understand how the crude rose 173m up to the seabed after rock “parted” while drilling a 22cm-wide column.
“We have an ongoing investigation. We will share the lessons learned with the people of Brazil to ensure that this never happens here or anywhere else in the world,” Buck said.
Lawmakers, some of whom characterized the spillage as a “crime” also turned their ire on ANP during the four-hour hearing, which they said had proven ill-equipped and ill-prepared even as Brazil pursues its ambitions to rapidly increase oil output.
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