Bloomberg News

Chevron Plans Suspension at Brazil’s Frade Field on New Seep

March 15, 2012

Chevron Corp. (CVX), stopped from drilling in Brazil’s offshore Frade Field after a spill last year, requested authorization from the nation’s petroleum regulator to suspend production there while it investigates a new sea-floor seep.

Frade has been producing about 60,000 barrels of oil a day, half of it net to Chevron, the San Ramon, California-based company said today in a statement. It called the suspension “precautionary” based on the new seep and subsidence of the sea floor.

“The company will conduct a comprehensive technical study and prepare a complementary study to better understand the geological features of the area, working with our partners and seeking necessary approvals from National Petroleum Agency,” Chevron said in the statement.

Chevron spilled an estimated 3,000 barrels at Frade in November as Brazil is increasing scrutiny of deep-water drilling following the 2010 Macondo spill in the U.S. Gulf of Mexico. Production at Petroleo Brasileiro SA (PETR4), Brazil’s state-controlled producer, grew at the slowest pace since 2007 last year partly due to output stoppages for security concerns.

Chevron holds a 52 percent stake in Frade and is the operator. Partners include Petrobras with 30 percent and Frade Japao Petroleo Ltda. -- a joint venture of INPEX Corp. (1605), Sojitz Corp. (2768) and JOGMEC -- with 18.26 percent.

Chevron fell 0.6 percent to $110.03 at the close in New York.

‘Complex Field’

Chevron is seeking to suspend its operations so it can investigate the behavior of the oil reservoir at Frade, Rafael Williamson, a director of corporate affairs at Chevron, said at a press conference in Rio de Janeiro today.

“Frade is a relatively complex field,” he said. “Despite all the understanding that we have about oil and gas exploration, we are always reaching new frontiers. We are now in front of one of them.”

Chevron initially identified some small oil spots on March 4 and the company found a fissure on March 13 and alerted the regulator the same day, Williamson said. The company installed a system to collect the drops before they reach the surface, he said.

“We captured less than five liters (1.3 gallons),” Williamson said.

Regulatory Investigation

The petroleum regulator is investigating Chevron for not meeting the agency’s request for safeguards to avoid new leaks after a November spill, the agency, known as the ANP, said today in an e-mailed statement.

Chevron faces fines for its handling of the spill after the probe is completed, an official at the agency, who declined to be named because of agency policy, said in a telephone interview.

The company faces as much as 150 million reais in fines from the ANP for three separate infractions related to the spill of up to 3,000 barrels. A federal prosecutor filed a 20 billion- real ($11.1 billion) lawsuit against Chevron in December.

Chevron isn’t altering its investment plans for Brazil after the suspension, Williamson said.

To contact the reporter on this story: Jim Polson in New York at jpolson@bloomberg.net

To contact the editor responsible for this story: Susan Warren at susanwarren@bloomberg.net


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