Brazil Court Upholds Chevron, Transocean Ban

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August 28, 2012

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.

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