UPDATE: Following Oil Spill, Chevron & Transocean Face Civil Lawsuits

By The Maritime Executive 12-29-2011 11:21:49

Transocean released the following update on the oil spill in Brazi on December 23, 2011l:

On or about November 7, 2011, a hydrocarbon release occurred in the vicinity of a development well being drilled by Chevron Corporation (“Chevron”) off the coast of Rio de Janeiro in the Frade field with a semisubmersible drilling rig, the SEDCO 706, owned by a subsidiary of Transocean Ltd. (“Transocean”). The incident involved the release of hydrocarbons from fissures in the seabed. The development well was killed and the oil spill, estimated by Chevron to be approximately 2,400 barrels, is being contained by Chevron. There are no reports of the oil spill reaching the shoreline.

The oil spill has given rise to investigations and a civil lawsuit by a federal prosecutor against Chevron and Transocean. The lawsuit, filed on December 14, 2011, in the federal court in Campos, Brazil, seeks damages from both companies and suspension of their activities in Brazil. Transocean has not been served with this action.

On December 21, 2011, a Brazilian federal police marshal issued a report to the federal prosecutor in Rio de Janeiro, Brazil, in connection with the release, recommending the indictment of a Brazilian subsidiary of Transocean and five of its employees along with a Brazilian subsidiary of Chevron Corporation and several of its employees.

Transocean’s drilling services contract with Chevron for the SEDCO 706 requires Chevron, among other things, to indemnify Transocean for pollution or contamination based claims arising below the surface of the water.

Statements regarding any future aspect of the release, the effects, results, investigation, damage assessment relating thereto, mitigation of environmental impact, as well as any other statements that are not historical facts, are forward-looking statements that involve certain risks, uncertainties and assumptions. These include but are not limited to results of searches, investigations and assessments, actions by the federal and state authorities in Brazil, actions by customers and other third parties and other factors detailed in Transocean’s most recent Form 10-K and other filings with the Securities and Exchange Commission (the “SEC”), which are available free of charge on the SEC’s website at www.sec.gov. Should one or more of these risks or uncertainties materialize, or should underlying assumptions prove incorrect, actual results may vary materially from those indicated.

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UPDATE : New developments in the Brazilian Chevron oil spill disaster estimate that penalty fines for the American company could exceed $145 million, almost triple the initial estimate reported earlier in the week.

The Brazilian Environmental Agency has so far fined Chevron $28m, and has two more $28m payment installments to come. The National Oil Agency (ANP) said they are also looking to tack on $56m biodiversity damage fines, as well as a $5.5m penalty, if the government finds Chevron guilty of violations during emergency procedures. The ANP stipulates that Chevron released false information regarding the spill, and that they did not have the necessary equipment to contain the spill.

While the oil slick in Brazil's waters is now moving away from the coastline, officials still fear that the slick could reach the tourism-rich waters of Rio de Janeiro.

In addition to the fines, Chevron is now facing being barred from operation in all of Brazil's deepwater oil fields.

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As of Monday afternoon, Brazil’s National Petroleum Agency (ANP) says that oil leaking from the seabed near the Chevron well off the Brazilian coast has slowed to a residual flow after the company has cemented the well, with only a small fraction of oil seeping through the crevices of the seabed.

U.S. oil giant, Chevron, has claimed full responsibility for the incident and is now facing at least $51 million in fines and reparations for the oil spilled from the Frade field off Brazil. The impending fines were outlined in a report published by a local Sao Paulo newspaper.

George Buck, CEO of Chevron, announced on Sunday that the company will fully clean up the spill and will share the lessons to be learned in hopes that a similar incident can be prevented in Brazil, as well as the rest of the world.

The spill at the Frade field on November 8th is one of the largest oil spills to hit Brazil’s ever-growing oil industry, and has raised eyebrows internationally at their abilities to handle disasters. Chevron has also come under fire from Brazilian authorities on their response to the incident.

Brazil’s ANP estimates between 200-330 barrels of oil were leaked into the ocean between November 8th and November 15th.

To learn more about the oil accident, watch the video below:

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