Chevron fined $27m for Brazil oil spill

Oil giant Chevron has been fined $27m by the Brazilian government for causing an offshore oil spill, but the penalty could rise as the US company faces a political backlash over the accident.

The fine, announced on Monday, comes a day after Chevron accepted full responsibility for the leak of 2,400 barrels at the Frade oil project, 370km off the coast of Rio de Janeiro.

The accident at the field, owned in partnership with Brazil’s state-controlled oil company Petrobras and a Japanese consortium, had slowed to a “residual” flow, said Haroldo Lima, head of Brazil’s National Petroleum Agency (ANP).

At it’s height, the leak – which began on November 7 after a rupture in the well’s structure – released 200 to 330 barrels per day.

Additional fines

Al Jazeera’s Gabriel Elizondo, reporting from Sao Paulo, said that the $27mn fine was the maximum amount regulators were permitted to impose under Brazilian law.

However, additional fines could be levied against Chevron if a federal investigation reveals further infractions.

Magda Chambriad, director of ANP, told reporters at a news conference on Monday that Chevron could face two additional fines of up to $27m each.

Meanwhile, Rio de Janeiro’s environment secretary said that the eastern state could levy $16m in fines against the oil giant.

A fine of $27m is roughly equivalent to the value of three-and–half days of output from the Frade field, which Chevron says produces 79,000 barrels per day.

‘On watch’

Brazil’s biggest oil spill since 2000 is a threat to Chevron’s credibility in the country after the company acknowledged it had caused the accident by wrongly estimating pressure and rock strength in the reservoir it was targeting.

While Chevron’s current production in Brazil is relatively small, at less than one per cent of its 2010 worldwide output, the company has invested heavily in the country’s offshore fields.

The total cost of Frade has been put at $2.8bn, while Chevron also has a 37.5 per cent interest in the $5.2bn
Petrobras-operated Papa Terra project in the Campos basin – which could double Chevron’s production from the country.

Chevron, which faces a police probe and has been called to testify in Brazil’s Congress, initially said it believed the
leak was a natural seepage.

Our correspondent said that at least one Chevron contract could be re-evaluated as a result of the spill.

“If they mess up again…it’s like they’re on watch now. So they have to be careful,” said Phil Weiss, oil analyst at Argus Research in New York.