Chevron suspended in Brazil over oil spill

Brazil has temporarily banned Chevron from drilling in the country after it caused an oil spill off the coast of Rio de Janeiro, raising doubts about the company’s role in one of the industry’s biggest investment programmes.

In a statement released on Sunday, Chevron took “full responsibility” for the oil spill off Brazil, as announced by the U.S.-based major’s top executive in the South American country, George Buck

“The sheen, estimated at approximately 18 barrels or less in volume, is located about 120 kilometres (75 miles) offshore Brazil and continues moving away from the coast,” Chevron said.

Late on Wednesday, Brazil’s National Petroleum Agency (ANP) accused the U.S. company of negligence late on Wednesday, announcing it would suspend all of Chevron’s drilling until it clarified the reasons for a spill that released almost 3,000 barrels of oil into the sea earlier this month.

Chevron has already plugged the leak but the handling of the incident has caused outrage in Brazil and comes at a particularly sensitive time as politicians quarrel over how to exploit the huge “pre-salt” oil reserves discovered in 2007.

“We made the decision based on analyses and our technical observations, which showed negligence when the company gathered basic data in preparation for drilling and also during the process of abandoning the area, as well as a lack of attention to the industry’s best practices,” ANP said in a statement. 

Earlier this week, Brazil’s environmental agency fined the company $28m for the spill and further penalties are expected.Rio de Janeiro’s state government also banned Chevron’s drilling contractor, Transocean, which operated the drill that caused the hugeGulf of Mexico oil spill last year, from operating in the region.

The leak, which Chevron said was caused when workers encountered unexpected pressure drilling a well 230 miles north-east of Rio in the Campos basin, is relatively small but tensions escalated following accusations that the company misled authorities over the incident. 

Federal police have also launched an investigation into the spill.

 A warning to other foreign companies?

 The regulator’s decision on Wednesday night came as George Buck, chief executive of Chevron’s Brazilian unit, was testifying before Brazil’s Congress, where he publicly apologized for the spill and said the company had done everything it could to resolve the situation.

“Please understand that during those first days it was very confusing, very difficult to manage the flow of information,” he said.

In reaction to the regulator’s decision, the company later said: “Chevron will follow all the rules and regulations of the government of Brazil and its agencies.”

The environment secretary of Rio de Janeiro state, Carlos Minc, said the ANP is considering preventing Chevron from participating in new auctions for oil-drilling rights over the next five years, although the regulator has not confirmed that information.

Minc also said at a press conference that Brazil’s Federal Police may file criminal charges against seven company executives, who could even face prison time if found guilty of violating environmental laws.

Analysts believe that the Brazilian government is keen to make an example of Chevron as a warning to other foreign companies looking to take a share of Brazil’s pre-salt reserves, which are estimated to contain as much as 50bn barrels of oil.

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