Chevron and Transocean Operations in Brazil Will Not be Suspended – Judge

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February 29, 2012

RIO DE JANEIRO (Dow Jones)–A federal judge in Brazil denied an injunction to suspend the local operations of U.S. oil major Chevron Corp. (CVX) and rig operator Transocean Ltd. (RIG, RIGN.VX), saying that the injunction would have punished the companies before they had a chance to defend themselves in court.

A federal prosecutor had asked for the injunction in the wake of a November oil spill at the Chevron-operated Frade field offshore Brazil. A drilling accident caused an estimated 2,400 to 3,000 barrels of crude oil to seep into the sea from cracks in the seabed. The injunction was part of a 20 billion Brazilian reais ($11.8 billion) civil suit filed against the two companies in December.

“The risk of new accidents should be real and imminent, not merely hypothetical,” Judge Raffaele Felice Pirro said in his decision. Absent evidence that the two companies activities represented a real and imminent danger to society, the injunction couldn’t be granted, the judge said.

A federal court official said that the civil lawsuit would continue, although it is unclear whether the federal prosecutor could seek another injunction or appeal the judge’s ruling.

“We welcome the judge’s decision to deny an injunction and we will continue to cooperate with the authorities,” Transocean said in an emailed statement. Chevron officials weren’t immediately available for comment.

The drilling accident Nov. 7 caused an oil spill at the Frade oil field, which lies in deep Atlantic waters off the coast of Rio de Janeiro state. Frade was producing about 79,000 barrels a day at the time of the accident, according to Chevron. Regulators have already requested that one of the company’s 10 production wells and four water-injection wells be closed because of the presence of hydrogen sulfide gas.

Transocean operated the rig drilling the well that caused the accident.

Chevron is lead operator of Frade, which holds estimated recoverable reserves of between 200 million and 300 million barrels of oil equivalent, with a 51.7% stake. Brazilian state-run energy giant Petroleo Brasileiro (PBR, PETR4.BR), or Petrobras, holds 30%, while the Frade Japao Petroleo Ltda. consortium has the remaining 18.3% share.

The federal prosecutor, Eduardo Santos de Oliveira, said in filing the lawsuit that he found that Chevron and Transocean “weren’t able to control the damage caused by the spill of nearly 3,000 barrels of oil, which shows a lack of planning and environmental management by the companies.”

Chevron so far has been fined $28 million by environmental regulators, but that total is expected to climb as the investigation into the oil spill evolves. In addition, Brazil’s National Petroleum Agency, or ANP, has issued three infractions against Chevron related to the spill that each carry a possible maximum fine of $28 million.

-By Jeff Fick, Dow Jones Newswires

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