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Brazilian prosecutor doubles down on Chevron

The Americas Post - Chevron's Brazil Corporate Affairs Director Rafael Williamson has a headache

A crusading federal prosecutor in Brazil this week opened his second 20 billion real ($10.9 billion) lawsuit against U.S. oil company Chevron and driller Transocean, doubling the charges against both companies while drawing criticism from other Brazilians.

The new lawsuit, the second filed by Eduardo Santos de Oliveira against the companies in less than five months, is related to an oil leak discovered on March 4 in Chevron’s offshore Frade field northeast of Rio de Janeiro, the Federal Public Prosecutor’s office announced. The case in federal court in Campos, north of Rio de Janeiro, would also block Chevron and Transocean from operating in Brazil, transferring Brazilian profits overseas, obtaining government-backed finance and moving equipment from the country, the statement said.

“The second leak is as serious or more serious than the first, so the damages have to be in the same category,” Santos de Oliveira said. “While they are not a simple mathematical calculation, they are not symbolic either.”

Chevron and Transocean’s activities may have damaged the Frade reservoir, making it impossible to produce from the field, denying Brazil its right to royalties on a public resource, Santos de Oliveira claimed. In November, he launched his initial 20 billion real lawsuit over an estimated 3,000-barrel spill in the Frade field. Santos de Oliveira considers the spill as one of the worst-ever ecological disasters in Brazil.

Chevron’s November spill was less than 0.1 percent of BP’s 2010 Deepwater Horizon disaster in the Gulf of Mexico. Chevron said the March leak, which led to the latest lawsuit, was about two barrels, of which less than one escaped, making it less than 0.1 percent of Chevron’s November spill. Unlike in the Gulf of Mexico, no Chevron oil came near the coast. “The filing of the second lawsuit is another in a series of outrageous actions brought by the same district attorney who previously filed both a criminal and civil case, all of which are without merit,” a Chevron statement responded. “The 20-billion-real figure in both civil lawsuits is arbitrary and has no legal and factual basis,” Chevron said.

The huge amount of the suit has caught the attention of politicians close to the government of President Dilma Rousseff. Jorge Viana, a senator from Rousseff’s Workers’ Party and one of the country’s leading environmentalists, said in March that the damages being sought are “irresponsible” and could bring about the closure of Brazil’s oil industry. The industry generates revenue worth more than 10 percent of gross domestic product in Brazil, the world’s sixth-largest economy. Chevron is the No.2 U.S. oil company by market value. Chevron now faces about $22 billion in potential legal charges from cases launched by Santos de Oliveira alone. That’s more than the $20 billion BP set aside to pay damages and for its cleanup of its far larger spill in the Gulf of Mexico.

“Look at what’s being set aside by BP in the United States and you’ll see everything you need to know about what the prosecutor is asking,” said Ildo Sauer, a professor at the University of Sao Paulo’s Electro-tenical and Energy Institute and former head of natural gas and energy at Brazil’s state-led oil company Petrobras. “I can’t figure out where he got these numbers from or how he came up with such a figure,” said Sauer, who has a Ph.D in nuclear engineering from the Massachusetts Institute of Technology. In the BP spill 11 died and about 4.9 million barrels leaked over three months. In Frade, no one was hurt and the leak was stopped in four days, according to Chevron. The amounts being asked of Chevron and Transocean don’t include unspecified damages being sought by Brazil’s largest oil workers’ union for the same spill or several hundred million dollars of fines already levied against the companies by Brazilian regulators. Santos de Oliveira has also filed criminal charges against Chevron, Transocean and 17 of their employees. The charges could carry jail terms of up to 31 years.

“Everything suggests that we are operating in an environment where there is a huge gap in our legal, institutional and technological ability to deal with and run an offshore oil industry,” Sauer said in an interview. The prosecutor’s office also said Tuesday that Santos de Oliveira plans to investigate Brazilian national oil regulator ANP and environmental protection agency Ibama over their handling of the November spill and March leak. Santos de Oliveira recently said he plans to expand his probe to investigate other oil companies in the Campos Basin, the location of the Frade field and the source of about 80 percent of Brazil’s more than 2.6 million barrels a day of oil and natural gas output.

The biggest operator in the Campos Basin is Petrobras, which operates 39 of the 47 producing fields in the region, according to Brazil’s oil regulator, the ANP. Other operators in the area include Ango-Dutch Shell, Brazil’s OGX Petroleo , Spain’s Repsol, Denmark’s Maersk Oil and the U.K’s BP. Chevron and its partners in Frade, Petrobras and Frade Japao, a Japanese group led by Inpex  and Sojitz, asked for and received permission to end operations temporarily in that field after the March leak. The field, which was producing about 80,000 barrels a day at its peak last year, was producing about 62,000 barrels a day when it was shut down.

Chevron owns 52 percent of Frade, Petrobras owns 30 percent and Frade Japao 18 percent. Petrobras former chief executive Jose Sergio Gabrielli said last year that Chevron’s partners may have to pay their share of any damages won against Chevron for actions in Frade. Chevron said on March 21 that tests showed the March leak was not from any reservoir it was producing from in the field. An ANP official told a Brazilian Senate committee earlier this month that the November spill caused no discernable environmental damage.

Both Chevron and Transocean have said they have done nothing wrong, that they are innocent of any crimes and will defend their employees against civil and criminal charges.