Brazil Police Seek to Indict Chevron, Transocean Staff

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December 22, 2011

By John Lyons And Daniel Gilbert

SÃO PAULO—Brazil’s Federal Police are asking a federal prosecutor to indict as many as 17 Chevron Corp. and Transocean Ltd. employees, including Chevron’s Brazil director, George Buck, for their alleged roles in an oil spill last month off the coast of Rio de Janeiro, a senior Brazilian police official said in a televised interview late Wednesday.

“The companies acted in a frivolous, irresponsible manner in the incident,” Federal Police investigator Fábio Scliar said on the Brazilian television station TV Globo. Mr. Scliar couldn’t be reached for comment.

In separate statements, Chevron and Transocean, the company contracted by Chevron to drill the well, confirmed that the Federal Police were recommending indictments following an investigation into possible environmental and other crimes stemming from the spill.

In their statements, both Chevron and Transocean said they acted appropriately and responsibly.

To be sure, some analysts say Brazilian authorities may resist going through with an indictment, some experts said. That is because it would set a precedent for criminal charges in the case of even relatively small spills—a precedent that could come back to haunt the government if state-run oil giant Petróleo Brasileiro SA, known as Petrobras, has a spill.

All the same, the prospect of criminal indictments of U.S. oil executives marks a serious escalation in Brazil’s already-tough response to the early November spill at the Frade oil field, which gushed some 2,400 barrels of oil into the ocean off Rio de Janeiro before it was successfully capped.

Criminal charges less than two months after a spill are unusual. For example, U.S. authorities are still investigating whether any crimes were committed in last year’s far bigger Gulf of Mexico spill.

Brazilian authorities have already hit Chevron with fines and ordered a cessation of Chevron’s drilling operations in the country. Meantime, a range of politicians have suggested that Chevron be expelled from the country, and a federal prosecutor has brought an $11 billion civil suit against the firm.

Chevron officials and even some Brazilian oil executives accuse Brazilian authorities of overreacting to the spill, which was a fraction of the 4.9 million gallons that gushed into the Gulf of Mexico last year. It is also far smaller than a string of spills at installations run by Petrobras that dumped several hundred thousand barrels into the sea.

In an earlier interview, Chevron’s head for Latin America and Africa, Ali Moshiri, said that the company acted promptly and managed to contain a spill quickly using industry best practices. He said that, unlike the Gulf of Mexico spill, last year, no equipment failed. Instead a fissure opened up in the sea floor.

Brazilian oil-industry experts say possible criminal prosecutions and threats of expelling Chevron could backfire on Brazil by scaring away potential oil partners at a time when the country is about to embark on a major push to become a destination for global oil majors. Brazil has discovered some of the world’s biggest oil finds in decades lying in ultradeep water, below miles of rock and hard-to-drill salt.

“Unfortunately, the oil industry has become politicized,” said Adriano Pires, the director of Brazilian Infrastructure Center, an energy-consulting firm.

Indeed, oil has become synonymous with political and economic success in Brazil. The governing Workers Party has promised that the deep-water finds will fund poverty eradication and lift Brazil into the first world.

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