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Chevron halts Brazil drilling after new leak
US oil giant announces temporary stop to production after a "small new seep" found in same area of earlier spill.
Last Modified: 16 Mar 2012 20:46
Chevron's previous spill leaked 2,400 to 3,000 barrels, resulting in an $11 billion civil lawsuit [AFP]

Chevron  has filed to temporarily halt production operations in Brazil after it detected a "small new seep" of oil in the same offshore field where it suffered a high-profile leak in November.

The US oil company said Friday it was taking the step as a precautionary measure to study its "reservoir management plans" in Brazil, where it has spent over $2bn developing the largest foreign-run oil field.

If approved by Brazilian regulators, the suspension will shut down a field with the capacity to produce 80,000 barrels a day, more than 3 per cent of Brazil's oil output.

"The suspension of production is designed to let us analyze scientifically what caused this," Rafael Jaen Williamson, Chevron's director of corporate affairs in Brazil, said at a news conference in Rio de Janeiro.

The leak was first spotted on March 4, and engineers found the source on March 13, Williamson said.

He added that he hoped the suspension would only last "a matter of months" and that the decision does not alter Chevron's investment plans in Brazil.

Chevron's previous spill leaked 2,400 to 3,000 barrels from sea-floor cracks and resulted in an $11bn civil lawsuit, the largest environmental damages case in Brazil's history, even though the total amount of oil was less than 0.1 per cent of the BP spill in 2010 in the Gulf of Mexico.

Chevron said there is no evidence yet that the two spills in Brazil are related or that it caused the latest leak.

Shares slide

The move to suspend operations at the so-called Frade field, which is currently producing about 61,500 barrels a day, raises questions about the safety and speed with which Brazil can develop giant new offshore oil resources.

The Campos basin, where Frade is located, and the neighboring Santos basin contain an estimated 100 billion barrels of oil, enough to provide all current US needs for more than 14 years.

Brazil hopes the region, the world's most promising offshore frontier, will help it produce more than 7 million barrels a day of oil by 2020, passing the US to be the third-largest oil producer after Russia and Saudi Arabia.

Chevron's troubles in Brazil could force it to rethink its Latin American strategies. A shortage of trained workers, engineers and equipment have driven up costs in Brazil, and Chevron faces an $18 billion environmental verdict in Ecuador.

The request to suspend output came on the same day that Brazilian oil regulator ANP said it had notified Chevron that it would be fined an undisclosed amount for failing to prevent seepage at the site. Chevron is already facing fines of up to $121m for the November spill and has had its drilling license suspended in Brazil.

Chevron shares, which were already trading down for the second straight day before the news of the new Brazil leak, slid further. The shares fell as much as 1.1 per cent to $109.47, with trading volumes reaching the highest level in three weeks.

Source:
Agencies
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