Frade FPSO, Image courtesy Chevron

By Jeb Blount

RIO DE JANEIRO, April 8 (Reuters) – Brazil’s oil regulator, the ANP, said on Monday that it authorized Chevron Corp to restart output from an offshore oil field more than a year after a November 2011 spill forced the No. 2 U.S. oil company to stop Brazilian production.

Chevron was granted permission to restart output from four wells at the Frade field for one year and conditional approval to produce from two other wells in the case that additional production was needed to balance oil and natural gas pressure in the reservoir, the ANP said in a statement.

The Frade field was shut in March 2012 after an initial November leak of about 3,800 barrels of oil and the appearance of small and unexplained amounts of oil in the area in the months following the initial accident. Frade was producing about 70,000 barrels a day when the accident happened.

Brazilian prosecutors were seeking 40 billion reais ($20.1 billion) in damages for the November 2011 spill against Chevron and its drilling contractor Transocean Ltd. It is Brazil’s largest-ever environmental lawsuit.

Brazil’s oil regulator said the spill caused no discernable environmental damage. Criminal charges seeking jail terms up to three decades in prison against the companies and 17 employees were later dismissed by a judge.

Chevron and Transocean have said they have done nothing wrong, and in December prosecutors said they were close to a deal that would see Chevron pay about 311 million reais ($156 million) to settle the claims.

Brazilian prosecutors never charged Frade’s partners in the Frade field.

The Frade field is 52 percent owned by San Ramon, California-based Chevron, which is also the operator. Brazil’s state-controlled Petroleo Brasileiro SA, commonly known as Petrobras, owns 30 percent and Frade Japão, a joint venture between Japanese trading houses Sojitz Corp and Inpex Corp, has an 18 percent stake in the project.

(c) 2013 Thomson Reuters, Click For Restrictions

The Pacific Santa Ana commenced its 5 year contract with a Chevron subsidiary on March 21, 2012, and began operations in the U.S. Gulf of Mexico on May 4, 2012. The drillship can drill to a depth of 40,000 feet. Image: Pacific Drilling

Chevron Corporation (NYSE: CVX) on Tuesday announced that it has struck oil at the Coronado prospect off the coast of Louisiana in the deepwater Gulf of Mexico.

Coronado prospect in prolific Lower Tertiary Trend. Illustration: Chevron

In a statement, Chevron said the Walker Ridge Block 98 Well No. 1 encountered more than 400 feet (122 m) of net pay. The well is located approximately 190 miles (308 km) off the Louisiana coast in 6,127 feet (1,868 m) of water and was drilled to a depth of 31,866 feet (9,713 m), or roughly six miles.

The well was drilled with Pacific Drilling’s Santa Ana drillship.

“The Coronado discovery continues our string of exploration successes in the Lower Tertiary Trend, where Chevron is advancing multiple projects,” said Gary Luquette, president, Chevron North America Exploration and Production Company. “It also highlights the importance of the deepwater Gulf of Mexico as a source of domestic energy for the United States.”

Chevron says the well results are still being evaluated and additional work is needed to determine the extent of the resource.

Chevron, with a 40 percent working interest in the prospect, is the operator of the Coronado discovery well. The other owners are ConocoPhillips (NYSE: COP) with 35 percent, a subsidiary of Anadarko Petroleum Corporation (NYSE: APC) with 15 percent and Venari Offshore LLC with 10 percent.

Chevron is one of the largest leaseholders in the Gulf of Mexico and is currently constructing the Jack/St. Malo and Big Foot projects, which are scheduled to begin production in 2014. The company is also conducting appraisal activities at its previously announced Buckskin and Moccasin discoveries, also in the Lower Tertiary Trend.

RIO DE JANEIRO, Feb 20 (Reuters) – A Brazilian judge dropped criminal charges against Chevron Corp, Transocean Ltd and 17 of their employees related to a November 2011 offshore oil spill, the companies said on Wednesday.

The criminal case, and a civil suit seeking as much as 40 billion reais ($20.4 billion) in damages, have cast a chill over Brazil’s oil industry.

The criminal suit carried penalties of up to 31 years. The still-open civil case is Brazil’s largest-ever environmental lawsuit, even though the amount of oil spilled was much less than other recent spills in Brazil and abroad.

Brazilian oil output fell in 2012, and shutting Chevron operations in the South American country contributed to the decline. Investor interest was already waning in the face of regulatory changes and a bitter dispute over royalties that have blocked the sale of new exploration licenses for four years.

“Chevron has been tied up for more than a year over a spill that caused no real damage,” said Adriano Pires, head of the Brazil Infrastructure Institute, a Rio de Janeiro energy think-tank. “It’s impossible to understand how a country that wants to attract investment would have taken so long to dismiss the case against Chevron.”

He said failure to resolve the legal actions related to the spill will make it hard for Brazil to attract investment for three oil and gas rights auctions planned for later this year.

With criminal charges dismissed, industry watchers will focus on the civil case and Chevron administrative efforts to restart output in the Frade field, where the spill occurred in November and all output was stopped in March.

In December, Chevron and Brazilian prosecutors said they were near a settlement in the civil case and that Chevron was ready to pay 311 million reais ($159 million) to compensate for damages caused by the spill, less than 1 percent of the amount initially sought.

The prosecutor called the offer “reasonable.” Chevron said a settlement would render the suits extinct and that it, and not Transocean, would pay all costs. Chevron said in December that a settlement of 30 million
reais would be reasonable. They based their estimate on the size of financial awards in the Deepwater Horizon case and Exxon Valdez spill in Alaska in 1989.

FIELD RESTART DELAYED
In December, Chevron expressed hope that it would be able to restart output at the Frade field by early January. But output remains stalled. Court holidays delayed resolution of the civil case and Brasil’s oil regulator, the ANP, moved more slowly than expected on renewing Chevron’s authorization to pump oil from
the Frade field, an oil industry executive involved in planning for the field told Reuters.

Chevron and its partners “had hoped to be producing oil again from Frade by now,” said the executive, who asked not to be named because he is not authorized to talk to the press. “We got caught by the year-end, then the Carnaval holidays.”

The Frade field is 52 percent owned by California-based Chevron, 30 percent by Brazil’s state-led Petroleo Brasileiro SA and 18 percent by Frade Japão, a group owned by Japanese trading companies Inpex Corp and Sojitz Corp.

Chevron’s global output in 2012 was 70,000 barrels per day short of company expectations. The loss of Frade was responsible for about 40 percent of that loss, according to Chief Financial Officer Patricia Yerrington.
Restart requires approval of the ANP. The regulator’s website said the restart was not on the agenda of its board meeting Wednesday, and officials could not be immediately reached for comment.

Petrobras, as the Brazilian company is known, Sojitz and Inpex were never charged in relation to the spill.

DECISION WELCOMED
The press offices of Chevron and Transocean confirmed a Reuters report of the dismissal of criminal charges, which had been based on three sources with direct knowledge of the case.

One of the sources told Reuters that prosecutors can still appeal the ruling dismissing the charges, made by Judge Marcelo Luzio of the 10th Criminal Unit of the Rio de Janeiro Federal Court. The sources asked not to be named because their employers do not allow them to speak about the case.

“We welcome this news that the Court recognized, with respect to the Frade event of November 2011, that Transocean’s crews did exactly what they were trained to do, acting responsibly, appropriately and quickly while always maintaining safety as their top priority,” Guy Cantwell, a Transocean spokesman in Houston, said in an e-mailed statement.

The criminal charges were filed last March by Eduardo Santos de Oliveira, the same Brazilian prosecutor who filed the civil lawsuit. Oliveria, who is on vacation, told Reuters on Wednesday he had not yet been informed of the dismissal.

Dos Santos, who works from Campos, Brazil, in northern Rio de Janeiro state, was taken off the cases when they were moved to the city of Rio de Janeiro, the state capital. He considers the spill one of the worst ecological disasters in Brazil’s history.

‘NO DISCERNABLE DAMAGE”
But the ANP reported last year that the 3,600 barrel spill in the Frade field was quickly stopped, cleaned up and caused no discernable environmental damage.

The spill was less than 1/1000th of the size of BP Plc’s Deepwater Horizon disaster in 2010. The Frade spill never came close to shore and no workers were injured. In the Deepwater Horizon disaster 11 died.

Chevron said in a statement that it “is pleased by the court’s decision. Chevron Brasil remains committed to its policy of full transparency and close cooperation with the Brazilian authorities.”

Chevron shares fell 0.8 percent in New York on Wednesday afternoon, in line with a broader stock market decline.

Shares of Transocean, which was also operator of the Deepwater Horizon rig which burned and sank in 2010 after BP’s Macondo well exploded in the Gulf of Mexico, dropped 3.4 percent.

Chevron Corp. (CVX) has signed petroleum agreements related to three offshore areas in Morocco, a push to expand its footprint in frontier basins.

The oil and gas company has signed the agreements with Morocco’s Office National Des Hydrocarbures Et Des Mines which, once awarded, will allow Chevron to acquire seismic data and conduct studies in deepwater areas known as Cap Rhir Deep, Cap Cantin Deep and Cap Walidia Deep located between 60 miles and 120 miles west and northwest of Agadir, Morocco. The areas encompass about 11,300 square miles with average water depths ranging from between 330 feet to 14,700 feet.

“This is an opportunity for Chevron to expand its already strong presence in the region and allows us to acquire further knowledge about promising geology in an emerging area,” said Ali Moshiri, president of Chevron Africa and Latin America Exploration and Production Co.

Chevron has a 75% working interest in the three areas, with the Office National Des Hydrocarbures Et Des Mines holding the remaining 25%.

Chevron and other large oil and gas producers have been suffering the impact of a shaky global economy on oil and gas prices. In November, Chevron reported its third-quarter earnings fell 33%, missing expectations as its oil and gas production was disrupted by maintenance, legal issues and storms, and a refinery fire in California caused a sharp drop in fuel sales.

Earlier this month, the second-largest U.S. oil company by market value said it expects its fourth-quarter profit to rise compared with the previous quarter, benefiting from gains on assets and increased U.S. and international production.

Last month, Chevron said its Australian unit made two more natural-gas discoveries in the Exmouth Plateau area of the Carnarvon Basin, a hydrocarbon basin offshore western Australia.

Shares edged down by 55 cents to $114.69 in recent trading. The stock has risen 7.3% in the past 12 months.

-Write to Saabira Chaudhuri at saabira.chaudhuri@dowjones.com

(c) 2013 Dow Jones & Company

An aerial view is seen of oil that seeped off the coast of Rio de Janeiro, caused by a well drilled by Chevron at Frade, on the water in Campos Basin in Rio de Janeiro state November 18, 2011. REUTERS/Rogerio Santana/Handout

By Jeb Blount

RIO DE JANEIRO – Chevron Corp is willing to pay about 300 million reais ($144 million) to settle lawsuits in Brazil over an oil spill last year, a senior executive and a federal prosecutor said on Friday.

The talks over a possible settlement reinforce expectations of a swift resolution for Chevron, the No. 2 U.S. oil company, and its drilling contractor Transocean Ltd.

Related moves by Brazil’s oil regulator, the ANP, could also lead to a quick restart of output at Chevron’s Frade field, the location of the spill, which has been shut since March.

“We could have an agreement before Christmas,” Gisele Porto, the prosecutor responsible for the case, said after a public hearing. “The amount is reasonable, and I don’t think I could get a judge to sign off on more.”

She said Chevron and Brazil’s oil regulator, the ANP, suggested that the settlement include 311 million reais worth of damages and additional measures to improve the safety of offshore oil operations.

“It’s our understanding that if this settlement is accepted that the civil lawsuits will be extinct,” said Rafael Jaen Williamson Chevron’s director of corporate affairs in Brazil.

Chevron will pay the entire cost of the settlement, Williamson said. Transocean was found to have no responsibility in the spill by the ANP.

BIGGEST-EVER PROSECUTION

The expected settlement amount is less than 1 percent of the nearly $20 billion in damages initially sought by prosecutors in the case, Brazil’s largest-ever environmental prosecution.

“The prosecutor asked for too much and asked for it before investigations of the spill were even complete,” said Porto, who took over the case earlier this year.

The proposed settlement represents between six weeks to two months of Chevron’s share of output from the Frade field.

Chevron has a 52 percent stake in the Frade field, which was producing 60,000 barrels a day before it was closed on March 15. The heavy crude pumped at Frade trades at a discount to Brent crude, which has averaged $110.33 per barrel since then.

Brazil’s state-led Perobras owns 30 percent of output from Frade and Frade Japan, a Japanese group controlled by Sojitz Corp and Inpex Corp, owns 18 percent.

“I’m extremely disappointed,” said Eduardo Santos de Oliveira who launched the original lawsuit but handed off the case to Porto and colleagues when it was moved from Campos de Goytacazes to Rio de Janeiro in April.

“I think this sends a message that you can pollute and then escape a conviction by just paying a fine, I don’t think that’s right,” he said in a telephone interview on Friday.

Chevron, Transocean and 17 of their employees also face criminal charges that carry jail terms of up to 31 years in the largest environmental prosecution in Brazil’s history.

That case has also been shifted to Rio de Janeiro and will be handled by Porto.

OUTPUT EXPECTED TO RESUME

While smaller than the fines originally requested by Oliveira, Chevron’s Williamson said the value of the proposed settlement is well above what other such cases would suggest.

Using the amounts paid to settle lawsuits in the 750,000-barrel Exxon Valdez spill in Alaska in 1989 and the 5-million-barrel 2010 Deepwater Horizon disaster the Gulf of Mexico, Chevron lawyers determined that 30 million reais would be a reasonable amount for its 3,600 barrel spill.

Chevron and the ANP proposed paying 90 million reais, or triple its baseline estimate, for environmental damages, Porto said. The rest of the settlement’s cost would be to pay for equipment and measures to prevent future spills.

In a separate regulatory case, the ANP is wrapping up its investigation of the spill by checking if Chevron has taken the necessary steps to correct problems, said Raphael Moura, operational security superintendent of the ANP.

If inspections of the installations in the Frade field are satisfactory, Chevron could be given the go ahead to restart production within two months, Moura said after the hearings.

“We’d be ready to ramp up production almost immediately,” Williamson said. He added that permission to drill new wells or restart water injection to boost output would require additional regulatory clearance.

No one was hurt in the Frade accident. No oil reached shore, and there was no discernable environmental damage, according to the ANP. Nor was there any measurable harm to marine animals, Chevron lawyers said at the presentation.

In the Exxon Valdez and Deepwater Horizon cases thousands of seabirds and other animals such as whales and turtles were killed and fishing grounds were polluted and disrupted.

Eleven were killed and 17 injured in the fire on BP Plc’s Deepwater Horizon drilling rig.

On November 15, BP agreed to pay a record $4.5 billion in penalties and plead guilty to criminal misconduct charges in the United States.

(Reporting by Jeb Blount; Edited by Brad Haynes and Leslie Gevirtz)

© 2012 Thomson Reuters.

Image courtesy Chevron

(Dow Jones) Chevron Corp. (CVX) is working with Brazilian regulators to restart production at its Frade offshore field, after a court dismissed an injunction that barred the oil company and contractor Transocean Ltd (RIG) from operating in the country.

“Chevron is pleased with the court’s decision to dismiss the injunction,”Chevron spokesman Kurt Glaubitz said in an e-mail. He added that the company had voluntarily suspended production at Frade, the site of a deepwater oil leak, in March, and it is “working with regulatory agencies for a safe restart” according to a plan submitted in August.

Transocean said in a statement that “another positive ruling has been made in favor of Transocean, which further supports our successful legal efforts to prove Transocean’s crew did nothing wrong in the Frade incident.”

The company said it would continue to pursue “a complete and favorable” resolution to all litigation in Brazil.

The ban was enacted by a Brazilian court in a legal battle following a drilling accident at the Chevron-operated Frade field last November, when an estimated 3,700 barrels of crude oil seeped from cracks in the seabed. The injunction was opposed not only by Chevron and Transocean, but also by Brazilian state-owned oil giant Petroleo Brasileiro S.A. (PBR), which leases rigs from Transocean, the world’s largest deepwater rig contractor.

- By Angel Gonzalez, Jeff Fick contributed to this article. (c) 2012 Dow Jones & Company

Owned by Dolphin Drilling, a subsidiary of Fred. Olsen Energy ASA, the Bollsta Dolphin newbuild is a Moss Maritime CS 60 E design and is capable of operating in harsh environments in water depths up to 10,000 feet.

The contract includes a mobilization fee of USD $42 million. In connection with the newbuild contract, an estimated USD $40 million will be invested in a second BOP and additional riser.

Chevron Brasil President George Buck will have to pay a 500,000 Brazilian reais ($245,000) bond to ensure he will return to Brazil to participate in court cases related to the November spill at the Chevron-operated Frade field. Mr. Buck and 16 other employees at Chevron, drill-rig operator Transocean Ltd. (RIG) and local firm Contecon face criminal charges related to the spill. The court’s decision only covers Mr. Buck, the source said.

Both Chevron and Transocean have denied any wrongdoing.

In March, a federal prosecutor charged the 17 people with environmental crimes in the accident, which regulators estimate caused 3,700 barrels of oil to seep from cracks in the seabed.

In addition to criminal and civil lawsuits, Chevron faces hefty fines from regulators.Brazil’s National Petroleum Agency, or ANP, also suspended Chevron‘s drilling rights in the country. Production at Frade has been halted while Chevron and its partners in the field study the area’s complicated geology.

Chevron operates the field with a 51.7% stake, while Brazilian state-run oil companyPetroleo Brasileiro (PBR, PETR4.BR), or Petrobras, holds a 30% share. The remaining stake is held by the Frade Japao Petroleo Ltda. consortium.

-By Jeff Fick. (c) 2012 Dow Jones & Company, Inc.

Image via Shutterstock

RIO DE JANEIRO–A Brazilian court on Tuesday upheld an injunction that bars U.S. oil major Chevron Corp. (CVX) and drilling company Transocean Ltd. (RIG) from operating in Brazil, but a broader appeal of the ban is still pending.

A panel of three judges unanimously rejected a technical motion in the case, according to a decision posted on the court’s Web site. Chevron said that while the company was disappointed with the court’s decision, the appeal is ongoing. “The appeal on the merits of the injunction is still pending and a decision is expected in coming days,” said Chevron spokesman Kurt Glaubitz.

Transocean, meanwhile, added that its rigs continue to operate in Brazil. “We’re very disappointed with the court’s ruling and disagree with it,” said Transocean spokesman Guy Cantwell. “The case is without merit.”

Chevron and Transocean both appealed the late-July ruling by a Brazilian court that banned Chevron and drilling-rig operator Transocean for their roles in an offshore oil spill last year. The two companies had 30 days to halt operations or face hefty fines.

Tuesday’s ruling is the latest in a series of court cases related to a drilling accident last November at the Chevron-operated Frade offshore oil field. The accident caused an estimated 3,700 barrels of crude oil to seep from cracks in the seabed. Chevron faces fines from local environmental and oil-industry regulators, while both companies face civil and criminal lawsuits brought by a federal prosecutor.

Chevron and Transocean have denied any wrongdoing in the accident.

Both companies have also received support from state-run energy giant Petroleo Brasileiro (PBR, PETR4.BR), or Petrobras. Petrobras is a partner with Chevron in the Frade field and has seven Transocean rigs drilling for the company offshore Brazil. Petrobras will offer help to the two companies in their legal battle, the company’s exploration and production director Jose Formigli said Aug. 15. “There is no motive for this embargo,” Mr. Formigli said at the time.

In July, Brazil’s National Petroleum Agency, or ANP, cited Chevron for 25 infractions related to the incident and said that the company would be fined close to the 50 million Brazilian reais ($24.4 million) allowed by law. The total fine is expected to be determined later this month.

Transocean, meanwhile, was cleared of any wrongdoing in the accident by the ANP.

Despite the incident, ANP officials said that they would meet with Chevron to discuss restarting output at Frade, which was shuttered voluntarily by the company in March after new oil seeps were discovered.

-By Jeff Fick. (c) 2012 Dow Jones & Company, Inc.

Wheatstone plant site, image: Chevron

SYDNEY–Chevron Corp. (CVX) and Royal Dutch Shell PLC (RDSB) agreed Monday to swap stakes in two multibillion dollar natural gas projects in Australia, betting on the country’s ability to feed Asia’s growing energy demand just as competition from Africa and North America intensifies.

Chevron, the second-biggest U.S. oil company by market value after Exxon Mobil Corp. (XOM), will transfer its 17.5% interest in the proposed US$30 billion-plus Browse export terminal in Western Australia state to Shell in exchange for the Anglo-Dutch company’s interest in two gas fields associated with the US$29 billion Wheatstone export terminal, plus US$450 million in cash.

Australia has emerged as a crucial plank in both company’s development strategies due to its political stability and proximity to fuel-hungry Asian buyers. With close to a dozen natural gas export terminals planned for its coastline, the country is poised to leapfrog Qatar as the world’s top exporter of liquefied natural gas by the end of the decade. LNG is natural gas chilled to a liquid so that it can be shipped by sea.

“I actually believe Asian demand is going to be so great that it can take probably all the gas that can be delivered,” Chevron Vice Chairman George Kirkland said in an interview.

The Wheatstone project will have an initial capacity of 8.9 million metric tons of LNG from two production units, or trains, but Chevron wants to increase this in stages to as high as 25 million tons. Mr. Kirkland said the deal with Shell enhances Chevron‘s ability to expand Wheatstone but declined to comment on when a final investment decision on a third train may be made. Chevron would still welcome nearby resource owners to process their gas through an expanded Wheatstone, he said.

The swap “might be read as slightly more beneficial to Chevron,” energy research firm Tudor Pickering Holt & Co. said in a note. The analysts added that the newly acquired land will give Chevron additional gas to expand its Wheatstone project at a later date, while it allows the company to get out of a field for which it had less strategic use. The extra half a billion in cash was icing on the cake, the analysts said.

The deal represents a bold move by Shell to get involved more heavily in Browse, a development led by Woodside Petroleum Ltd. (WPL.AU) that faces technical and environmental challenges before it can make its first shipments in 2017 as planned.

Shell’s Upstream International Director Andy Brown said the swap aligns with the company’s strategy of taking bigger stakes in key gas resources and helps simplify Browse’s ownership.

“We’re committed to continue working with Woodside, the other JV participants and key stakeholders to secure the best possible development plan for this important resource,” Mr. Brown said in a statement.

Located in the deep waters of the Browse Basin offshore northwestern Australia, the resource contains an estimated 15.5 trillion cubic feet of recoverable gas and additional volumes of condensate, a type of light oil.

But the gas has a high carbon dioxide content and will be technically challenging to extract. It’s also far offshore, requiring a long pipeline to be built to processing facilities on the coast.

Due to be built in a place marked with one of the world’s longest chain of dinosaur footprints, the development is facing opposition from environmental groups and has angered some traditional land owners. There has also been disunity among joint venture partners over the best way to process the gas for export, although this may ease now that Chevron is exiting the venture.

The project received a big boost in July when environmental regulators in Western Australia gave the construction of the project a green light if enough safeguards are put in place.

All of Australia’s LNG developments are likely to face rising competition from emerging gas-export industries in North America and Africa, which will make it tougher to secure customers.

Chevron is targeting an expansion of the 43 billion Australian dollar (US$45 billion) Gorgon LNG project in 2014, while four rival projects in Queensland state to be fed with gas trapped in coal seams have acquired land that could accommodate multiple LNG trains.

North America currently has no established gas-export industry but a plunge in domestic prices there, driven by the emergence of new drilling techniques that allow the extraction of gas from tight rock formations, has increased the appeal of export markets that can attract higher prices.

LNG from East Africa isn’t expected until 2018 at the earliest, but the scale of discoveries by companies including Anadarko Petroleum Corp. (APC) offshore Mozambique, Tanzania and Kenya has prompted talk of a new gas-export hub facing Asia.

Mr. Kirkland said Chevron has a competitive advantage because project expansions are easier to develop than new projects built from scratch. Australia is also well-positioned geographically to ship gas into Asia, he said.

- by Ross Kelly, (c) 2012 Dow Jones Newswires, Ben Lefebvre in Houston contributed to the article.