Bloomberg News

Chevron May Need to Drill Relief Well at Brazil Spill Site

December 12, 2011

(Updates with Chevron statement in sixth paragraph.)

Dec. 9 (Bloomberg) -- Chevron Corp., the second-largest U.S. oil company, may need to drill a relief well at its $3.6 billion Frade project in deep water off Brazil’s coast as part of measures to counter a spill.

The cementing at the Frade well that leaked last month currently “doesn’t guarantee 100 percent efficiency,” Magda Chambriard, a director at the regulator known as ANP, told reporters today in Rio de Janeiro. Drilling a relief well is “one possibility” if Chevron doesn’t convince ANP that the cementing is solidly stuck to the ground, Chambriard said.

A decision on the cementing may be reached as early as next week, Chambriard said.

Chevron may have to pay as much as 350 million reais ($193.5 million) in fines and damages for the Nov. 7 leak of at least 2,400 barrels of crude at the Frade project off the coast of Rio de Janeiro.

Brazil has tightened safety conditions at oil projects following the spill at BP Plc’s Macondo well in the Gulf of Mexico last year, Chambriard said. The agency has shut 11 drilling rigs and production platforms over the past year because of safety concerns, she said.

“Our analysis so far indicates that the cement plugs have been properly placed,” Scott Walker, a spokesman for San Ramon, California-based Chevron, said in an e-mailed response to questions today. “Chevron will continue to discuss this and other issues with regulators and hopes to get their approval soon to proceed with the proposed well abandonment plan,” Walker said in the e-mail.

A relief well off of Brazil’s coast will cost at least $50 million, according to Hernani Chavez a former exploration and production manager at Petroleo Brasileiro SA.

“Cementing the well should be totally sufficient,” Chavez said in a telephone interview from Rio de Janeiro today. “At Macondo, a relief well was necessary because they were unable to halt the flow, the situation was completely different.”

--Editors: Jessica Resnick-Ault, Charles Siler

To contact the reporters on this story: Peter Millard in Rio de Janeiro at pmillard1@bloomberg.net; Rodrigo Orihuela in Rio de Janeiro at rorihuela@bloomberg.net

To contact the editor responsible for this story: Dale Crofts at dcrofts@bloomberg.net


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