Chevron keen for more Brazil oil, despite spill

By Leila Coimbra

RIO DE JANEIRO | Fri Nov 25, 2011 6:21pm EST

RIO DE JANEIRO (Reuters) - Chevron (CVX.N) said on Friday it planned to invest $3 billion in Brazil over the next three years, despite uproar in the South American country after an oil spill this month caused by its offshore drilling.

Chevron was ordered to halt its drilling in Brazil this week pending investigations by the Federal Police and other authorities, after an estimated 2,400 barrels of oil leaked from its Frade field off Rio de Janeiro's coast.

Chevron's Head of Latin America and Africa operations, Ali Moshiri, said planned investments were on top of $2.1 billion the oil giant has already invested in Brazil since 1997. He said Chevron was looking out for profitable oil concessions.

"We plan to continue participating in new auctions for oil exploration blocks in Brazil, if there is creation of value and benefits," Moshiri said in a press conference in Rio de Janeiro.

Talk of expansion comes after the second-largest U.S. oil firm was fined $28 million by Brazil's environmental agency for the spill, an amount likely to rise when the energy regulator and Rio's state government fines as they have promised to do.

Auctions for oil concessions in Brazil are now suspended as the country draws up new policies for the sector that is on the verge of rapid expansion after the discovery of massive 'subsalt' offshore reserves deep under a layer of salt rock.

Moshiri said the planned investment was mainly for the $5.2 billion Papa-Terra project. It has a minority stake with the project's operator, Brazil's state-run Petrobras (PETR4.SA). Both Papa-Terra and Frade are located in the offshore Campos basin where most of Brazil's 2 million-barrel-per-day output comes from.

Analysts say the spill is likely to increasingly politicize the governance of the country's oil sector. It has already given ammunition to Rio de Janeiro state's lawmakers fighting proposals to share more oil wealth with non-producing states.

DEFIANT ON WELL PLANS

Moshiri, described as premature the government's ban on its drilling, which it had already halted voluntarily shortly after the oil leak was discovered. It said the crude leaked from fissures in the seabed after rock "parted" during drilling.

He said the company had not given up on plans to drill another separate well at Frade that would perforate through to deeper subsalt oil reserves, despite the energy regulator turning down its request for that project this week.

The regulator, the ANP, said the well would be at even greater risk of spill than the one that leaked because of the greater depths involved.

Moshiri said the spill had cost Chevron about $30 million in clean-up costs. It had invested about $20 million in the well it was drilling which it is now working to permanently seal off.

The head of Chevron's Brazil operations, George Buck, apologized for the November 8 spill at the country's Congress on Wednesday where he insisted the company used all its resources to stop the flow of oil which has now virtually ceased.

Chevron has acknowledged that it was mistaken in its estimates of pressure and rock strength in the reservoir it was targeting. It is the majority stakeholder in the Frade concession with Brazil's state-run Petrobras (PETR4.SA) and a Japanese consortium.

The only rig working for Chevron off Brazil is Transocean Ltd's (RIGN.VX) Sedco 706, which drilled the well that leaked.

Brazil's national energy regulator, ANP, said on Friday the oil stain on the ocean surface many miles out to sea was shrinking but still visible.

(Writing by Peter Murphy; Editing by Alonso Soto and Andrea Evans)

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Brazil suspends Chevron's drilling rights

An aerial view shows oil that seeped from a well operated by Chevron at Frade, on the waters in Campos Basin in Rio de Janeiro state November 18, 2011.

Credit: Reuters/Rogerio Santana/Handout

By Peter Murphy

BRASILIA | Wed Nov 23, 2011 5:18pm EST

BRASILIA (Reuters) - The Brazilian government on Wednesday suspended Chevron Corp's drilling rights in Brazil until it clarifies the causes of an offshore oil spill, the latest twist in a political firestorm threatening the U.S. company's role in Brazil's oil bonanza.

The decision was announced as the chief executive of Chevron's Brazilian unit was testifying before the Brazilian Congress, where he publicly apologized for the November 8 spill that leaked about 2,400 barrels of oil into the ocean off the coast of Rio de Janeiro.

Brazil's National Petroleum Agency said it decided to halt Chevron's drilling rights after determining that there was evidence that the company had been "negligent" in its study of data needed to drill and in contingency planning for abandoning the well in the event of accident.

The agency, known as ANP, also rejected a request from Chevron to drill deeper wells into subsalt areas in the Frade field where the spill took place. The Frade field, which is located in the oil-rich Campos Basin, is the only block in Brazil where Chevron is producing oil and is the operator.

The Campos Basin is currently the source of more than 80 percent of Brazil's oil output.

Chevron has previously drilled for subsalt depth targets in the field, which is also owned by Brazil's state-controlled energy giant Petrobras and Frade Japao, a Japanese consortium. Chevron owns 52 percent of Frade, whereas Petrobras owns 30 percent and Frade Japao 18 percent.

Chevron has already been fined $28 million by Brazil's environmental agency for the spill, an amount that is sure to rise sharply when the ANP and Rio's state government slap fines on the company, as they have pledged to do.

Chevron's CEO in Brazil, George Buck, told Brazilian lawmakers on Wednesday that the company "acted as rapidly and safely as possible" and "used all resources" to contain and stop the flow of oil from the well.

"We controlled the source in four days. We worked with transparency and cooperation with the authorities of Brazil," Buck said. "Please understand that during those first days it was very confusing, very difficult to manage the flow of information."

The ANP said the suspension will remain in place until Chevron fully restores safety conditions in the field.

The Frade leak, while small, is likely to provide more ammunition for the growing worldwide opposition to offshore drilling in the wake of the estimated 4-million-barrel BP Deepwater Horizon spill in the U.S. Gulf in 2010.

Chevron is also a 30 percent partner in the nearby $5.2 billion Papa-Terra project. Petrobras is the operator in Papa Terra.

Chevron, Petrobras and Frade Japao produce about 79,000 barrels a day of oil in Frade. Petrobras and Chevron expect to produce about 140,000 barrels of oil and equivalent gas from Papa-Terra in 2013.

(Additional reporting by Jeb Blount in Rio de Janeiro; Writing by Todd Benson and Reese Ewing; Editing by Bob Burgdorfer)

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