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Chevron, Transocean in second $11bn lawsuit

Rio de Janeiro, April 4, 2012

A Brazilian federal prosecutor on Tuesday launched his second 20-billion-real ($10.9-billion) lawsuit against US oil company Chevron and driller Transocean, doubling the stakes against the companies as critics assailed him as overzealous.

The new lawsuit, the prosecutor's second civil damages case against the companies in less than five months, is related to an oil leak discovered in Chevron's offshore Frade field northeast of Rio de Janeiro on March 4, the Federal Public Prosecutor's office said in an emailed statement.

The new civil suit - filed in federal court in Campos, north of Rio de Janeiro - also seeks to prevent Chevron and Transocean from operating in Brazil, transferring Brazilian profits overseas, obtaining government-backed finance and moving equipment from the country, the statement said.

The prosecutor said he also plans to investigate Brazilian national oil regulator ANP and environmental protection agency Ibama over their handling of the November spill and March leak.

In November, the same prosecutor, Eduardo Santos de Oliveira, launched initial 20-billion-real lawsuit over an estimated 3,000-barrel spill in the Frade field.

The November spill was less than 0.1 per cent of BP's 2010 Deepwater Horizon disaster in the Gulf of Mexico. The March spill was even smaller. Neither came close to the shore.

"I can't figure out where he got these numbers from or how he came up with such a figure, it seems unreal," said Ildo Sauer, a professor at the University of Sao Paulo's Electrotenical and Energy Institute and former head of natural gas and energy at Brazil's state-led oil company Petrobras.

Chevron now faces about $22 billion in potential legal charges from cases launched by Santos de Oliveira alone. That's more than the $20 billion BP set aside to pay damages and for its cleanup of its far larger spill in the Gulf of Mexico. It's about triple the $7.8 billion it agreed to pay a month ago to more than 100,000 people who said they were hurt by US spill.

In the BP spill 11 died and about 4.9 billion barrels leaked over three months. In Frade, no one was hurt and the leak was stopped in four days, according to Chevron.

The amounts being asked of Chevron and Transocean don't include unspecified damages being sought by Brazil's largest oil workers' union for the same spill or several hundred million dollars of fines already levied against the companies by Brazilian regulators.

Santos de Oliveira, 47, has also filed criminal charges against Chevron, Transocean and 17 of their employees. The charges could carry jail terms of up to 31 years.

"Everything suggests that we are operating in an environment where there is a huge gap in our legal, institutional and technological ability to deal with and run an offshore oil industry," Sauer said in an interview.

"Every agency is running off in its own direction, prosecutors, police, and regulators alike," he added. "Much like a dog without a master: they either starve or do whatever they like."

Sauer said the companies should be punished if wrongdoing is proved, but said he believed the government is even more responsible.

On March 30, Santos de Oliveira told Reuters he plans to expand his probe to investigate other oil companies in the Campos Basin, the source of about 80 per cent of Brazil's more than 2.6 million barrels a day of oil and natural gas output.

The biggest operator in the Campos Basin is Petrobras, Brazil's state-led oil company, which operates 39 of the 47 producing fields in the region, according to Brazil's oil regulator, the ANP.

Chevron and its partners in Frade, Petrobras and Frade Japao, a Japanese group led by Inpex and Sojitz, asked for and received permission to end operations temporarily in that field after the March leak.

Chevron owns 52 per cent of Frade, Petrobras owns 30 per cent and Frade Japao 18 per cent. Petrobras former chief executive Jose Sergio Gabrielli said last year that Chevron's partners may have to pay their share of any damages won against Chevron for actions in Frade.

Chevron said on March 21 that tests showed the March leak was not from any reservoir it was producing from in the field. Chevron and Transocean called the previous civil suit and a criminal case excessive.

An ANP official told a Brazilian Senate committee earlier this month that the November spill caused no discernable environmental damage. No oil reached shore and no employees were injured. The March leak was far smaller and may be the result of a natural oil seep, Chevron has said.

Both companies have said they have done nothing wrong and that they are innocent of any crimes.

"Transocean acted responsibly appropriately and quickly putting safety first. We'll continue to strongly defend our company, our people and the quality of our services," Transocean said in a statement.

"The crew did exactly what it was trained to do. They always maintained control of the well and the rig's equipment worked perfectly. Once the facts are fully examined, they will demonstrate that we performed to the highest standards," the Transocean statement said.

Chevron officials were not immediately available for comment on the latest lawsuit.

Chevron shares fell 1.2 per cent to $107.14 in New York. Transocean stock fell 3.9 per cent to 48.83 Swiss francs. - Reuters




Tags: Lawsuit | Chevron | Brazil | Rio de Janeiro | Transocean |

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