Chevron: Brazil Well Shutdown Accounts For Less Than 10% Of Frade Oil Output

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December 2, 2011

RIO DE JANEIRO (Dow Jones)–Brazilian oil regulators once again penalized U.S. oil major Chevron Corp. (CVX) for safety issues at the company’s offshore Frade field, shutting down a production well after hydrogen sulfide gas was discovered during an inspection.

Chevron and Brazil’s National Petroleum Agency, or ANP, confirmed the well shutdown Thursday. The ANP issued its third notice of infraction to Chevron because the company failed to notify regulators about the presence of the gas, which Chevron called a “natural byproduct” of oil and natural gas production.

Chevron is facing heavy scrutiny from Brazilian regulators in the wake of an early November drilling accident that caused an oil spill at Frade, dumping between 2,400 and 3,000 barrels of crude into the Atlantic Ocean off Brazil’s coast. Chevron has already been fined 50 million Brazilian reais ($28 million) by environmental regulators, with additional fines expected.

The well, one of 11 production wells and four water-injection wells at Frade, accounts for less than 10% of Chevron’s 79,000 barrel-a-day output at the field, the company said. Hydrogen sulfide gas was found at the Frade floating production, storage and offloading vessel, or FPSO, during a safety inspection last month after the oil spill. No hydrogen sulfide gas leaks were found on the platform, the ANP said.

“Chevron is confident it will successfully respond to the ANP’s concerns and be able to resume operation of its production and injection wells in due time,” the company said. Chevron said that all of the production and water-injection wells at Frade are “safe and secure.”

Chevron said that it monitors the presence of hydrogen sulfide gas, with “safety systems and processes in place to ensure the safety of employees and contractors and the operations at all times.”

The ANP did not indicate a possible fine for the hydrogen sulfide gas, although two previous infractions related to the oil spill each carried a possible maximum fine of 50 million Brazilian reais ($28 million), the ANP said.

-By Jeff Fick, Dow Jones Newswires

-By Jeff Fick, Dow Jones Newswires

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