Brazilian federal police have opened a probe into US oil giant Chevron over alleged pollution linked to an oil spill at its offshore Frade project, a leak that an environmental group alleges is far bigger than the company has stated.

Fabio Scliar, who heads the Federal Police's division of environment and historical patrimony, said evidence showed Chevron's drilling went about 500 metres beyond permit.

Information provided by Chevron to the police does not match what police saw upon a visit to the site, he added.

"We saw a big spot of oil, in a very large area - we couldn't find the limits of the oil,” Scliar told Al Jazeera.

"I would not say chevron is lying, but I think that they are not as transparent as they should be.

“I think it is a disaster, I have no doubt that it is a big problem and environmental damage of huge proportions."

Brazil's energy regulator said oil seeps off the coast of Rio de Janeiro were caused by a well drilled by Chevron at Frade, where the company has estimated as much as 650 barrels had been released causing a "sheen" on the sea surface.

Energy Minister Edison Lobao told reporters in Brasilia on Thursday that the leak "is not good, but neither is it as grave as is being said."

He said the ANP, Brazil's oil and gas regulator, could take legal action against the company if there are grounds for it and warned that Chevron would be held to account for any breaches of conduct.

'Chevron co-operating'

Lobao did not express any specific complaint against Chevron however.

"If Chevron is not doing its part, it will be severely punished," Lobao said.

In an e-mailed response to Reuters' questions about the investigation, a Chevron spokesman said the company "continues to fully inform and cooperate with Brazilian government agencies as part of the company's response efforts."

The company on Tuesday said it had started plugging the well that was suspected of causing the oil seeps and that the seeps appeared to have stopped.

On Sunday, Chevron said the sheen has spread over 163 square kilometres from the well area. The company has vessels in the area working to either recover or disperse the oil.

Brazil is sitting atop massive deep-water oil reserves that were discovered over the past half-decade. The government is keen to tap these resources as a new source of revenue for federal, state and municipal governments.

But the Deepwater Horizon drilling rig that exploded in April 2010 in the US Gulf underscores the risks that offshore exploration and production poses for Brazil's extensive coastal economy.