Amazon Pink Dolphin’s Voice on Chevron: Exclusive: Chevron to face charges over Brazil spill

Exclusive: Chevron to face charges over

Brazil spill

An aerial view is seen of oil that seeped off the coast of Rio de Janeiro, caused by a well drilled by Chevron at Frade, on the water in Campos Basin in Rio de Janeiro state November 18, 2011. REUTERS/Rogerio Santana/Handout

By Jeb Blount and Joshua Schneyer

CAMPOS, Brazil | Fri Jan 27, 2012 7:17am EST

(Reuters) – A Brazilian prosecutor plans to file criminal charges against Chevron Corp and some of its local managers within weeks, adding the threat of prison sentences to an $11 billion civil lawsuit as punishment for a November offshore oil spill.

The filing in federal court in Campos, Brazil, will likely include a request for criminal indictment of George Buck, chief executive of Chevron’s Brazil unit, as well as other staff, three Brazilian government officials involved in the case told Reuters.

Transocean Ltd, whose rig was used in the operation, and some of its employees in Brazil are also expected to be charged, according to the officials, who requested anonymity because the case has not been presented to a judge. It is up to a judge to determine whether to accept the charges and proceed with indictments.

The backlash against the Chevron spill has highlighted the risks that energy companies face as they rush to get a piece of Brazil’s oil bonanza. Chevron’s legal troubles come as new oil rules give Brazil’s government more control over the country’s vast oil wealth. The regulatory overhaul has also delayed investment projects and new drilling licenses.

Buck and Chevron acted in a “careless and irresponsible way,” an official who investigated the 2,400-barrel spill told Reuters.

The official said it is unlikely that people facing charges will be arrested in the near term or be barred from leaving Brazil. As the case advances and more evidence is collected, however, such measures could be applied, the official added.

When Reuters informed Chevron that charges were pending, company spokesman Kurt Glaubitz said “Chevron believes that the charges are without merit.”

“Chevron is confident that once all the facts are fully examined, they will demonstrate that Chevron responded appropriately and responsibly to the incident,” he added.

Transocean spokesman R. Thaddeus Vayda declined to comment. Transocean is the world’s biggest offshore oil rig operator.

Brazilian prosecutors have become more active in going after alleged polluters, sometimes bringing aggressive charges to encourage offenders to settle cases. They are moving far more swiftly than their U.S. counterparts: BP’s 2010 spill in the Gulf of Mexico, more than 1,000 times larger in terms of oil, has not yet resulted in any criminal charges.

In Brazil, charges in cases such as these can take a decade before all appeals are exhausted. That could saddle Chevron and Transocean with years of costly litigation, said Paulo Augusto Silva Novaes, a lawyer with the Rio de Janeiro firm of Benjo, Garcia, Souto & Novaes.

The charges would come more than a month after a Federal Police investigator submitted a report saying Chevron and Transocean took “unacceptable” risks in the Frade oil field off Brazil’s southern coast, and recommended that 17 individuals be indicted.

As many as 12 of those people are from Chevron, according to legal documents reviewed by Reuters.

Chevron is also fighting a separate 20-billion-real ($11 billion) lawsuit brought by the same Brazilian federal prosecutors. Chevron also is contesting an $18 billion judgment in Ecuador related to environmental contamination from 1964 to 1992 by Texaco, which Chevron bought in 2001.


On November 7, a well drilled by Chevron using a Transocean rig 107 kilometers (73 miles) from the coast of Rio de Janeiro state, experienced a pressure “kick” after tapping into an oil reservoir in Frade.

An emergency blow-out preventer was activated, plugging the well 1,200 meters (3,937 feet) below the ocean surface. But days later, Chevron discovered oil seeps from the seafloor hundreds of meters from the plugged well. Pressure caused a breach of the well wall far beneath the seabed, allowing oil to infiltrate surrounding rock and work its way into the ocean, Chevron said.

Police and prosecutors allege that Chevron knew it was drilling in a high pressure area and that rock structures above the reservoir were fragile, factors that resulted in the spill and should have prompted more caution.

“This well could not and should not have been drilled,” the Federal Police said in a December 20 report.

Chevron denies taking any undue risk and says Brazilian authorities approved its drilling plans.

“The pressure was estimated using complex modeling and the data obtained from the 50 wellbores previously drilled at the Frade project,” Chevron’s Glaubitz said in a statement. “However, it is not uncommon to experience different conditions or pressures during drilling operations than those previously experienced.”

Chevron said it acted quickly and correctly to stanch the leak from the seafloor within four days. Its operations and spill response adhered to the “best practices” of the oil industry, the company said.

Brazilian prosecutors have independence to file criminal and civil charges against companies and their employees for environmental damages, said Gustavo Trindade, who was chief legal advisor to Marina Silva, a former Brazilian Environment Minister and presidential candidate.

These cases rarely result in convictions, large fines or prison sentences, said Novaes, a corporate law expert.

For example, state-run oil company Petrobras, a partner with Chevron at Frade, is still appealing convictions and more than 100 million reais of damages resulting from an offshore oil platform accident in 2001 and a giant oil spill in Rio in 2000.

Oil from the recent Chevron leak did not reach shore and was less than 0.1 percent of BP’s 4.9 million barrel Gulf of Mexico spill in 2010. The Frade leak was also much smaller than several previous spills in Brazil by Petrobras.

Petrobras owns 30 percent of Frade. Chevron own 52 percent and is responsible for field management. The rest is owned by Frade Japao, a unit of Japan’s Inpex.

Brazil’s oil regulator, the ANP, has suspended Chevron’s drilling license at Frade. The ANP and Brazil’s environmental protection agency Ibama have fined Chevron more than $50 million as a result of the spill.

Chevron says that there is no evidence the Frade leak, which prosecutors estimate was closer to 3,000 barrels, has had any impact on aquatic life or on humans.

Oil is still leaking from the sea floor, government officials said. The oil has leaked at an average rate of 1.4 liters a day for the last week and is being captured by undersea traps, Chevron said.

Recent flyovers have not detected oil on the ocean surface, Chevron added.

Brazil’s newfound oil wealth – including at least 15 billion barrels of deepwater discoveries since 2007 – puts the country among the world’s most promising oil frontiers. Since the new finds, the government has stopped auctions of oil concessions in its richest offshore areas.

Petrobras will be the operator and hold a minimum 30 percent stake in all future oil projects in those areas. Under a new system, oil producers must share their production with the government.

San Ramon, California-based Chevron has operated in Brazil for nearly 100 years. It has invested around $2 billion in the country and has plans to spend several billion more on future projects.

Chevron shares were up 0.37 percent at $108.10 on Thursday in New York. Transocean shares rose 3.62 percent to 44.39 Swiss francs ($46.73) in Switzerland.

Source: Reuters

Chevron profit drops after refining loss

Oil major’s production drops, refining swings to a loss, pay costs up

NEW YORK (MarketWatch) — Chevron Corp. shares fell Friday after the oil major’s fourth-quarter earnings missed Wall Street estimates on losses tied to its refining business and compensation costs, while its production fell slightly short of the mark.

An update from Chief Executive John Watson on recent developments over an environmental lawsuit in Ecuador, an oil leak in Brazil and an ongoing well fire off the coast of Nigeria didn’t provide any immediate lift to the stock.

Asked about plans for the company’s $10 billion in cash, Watson said its top priority remains completing its massive liquid natural gas projects in Australia and paying back shareholders with dividend and stock buybacks, rather than any big acquisitions.

Chevron plans to buy back about $1.3 billion in stock in the first quarter.

Watson didn’t rule out possible transactions after the company bought Atlas Energy for $3 billion last year, but said Chevron would be cautious about the price it would be willing to pay.

Chevron Corp.’s CVX -1.76%   profit dropped to $5.12 billion, or $2.58 a share, from $5.3 billion, or $2.64 a share, in the year-ago period. Wall Street analysts expected Chevron to earn $2.86 a share, according to a survey by FactSet Research.

Sales and other operating revenue rose to $58 billion from $52 billion on higher crude oil prices.

Worldwide production fell to 2.64 million barrels of oil equivalent a day, from 2.79 million barrels. Analysts estimated production of 2.65 million barrels per day.

Shares of Chevron dropped 2.5% to close at $103.96 as the worst performing stock among the 30 components of the Dow Jones Industrial Average DJIA -0.61% .

Chevron CEO John Watson updates on Ecuador, Nigeria, Brazil

During a conference call, analyst Paul Sankey of Deutsche Bank said Chevron has faced a “tough few weeks” with a rig blast in Nigeria that killed two workers, threats of legal action from Brazilian authorities after a subsea oil leak off the coast of Rio de Janeiro, and court rulings on a multi-billion-dollar environmental lawsuit in Ecuador.

CEO Watson said the Brazil oil leak that took place on the ocean floor “was handled in textbook fashion” by the company’s staff in Brazil. The Brazilian government has had a “strong reaction” to the incident.

He did not comment directly on reports that the government may file criminal charges against Chevron officials, but said he hopes the company gets treated the same as any other energy firm operating in the country, including Brazil’s state-owned oil company, Petrobras PBR -1.59% .

In Nigeria, Chevron hopes to begin drilling a relief well next week after an explosion killed two workers on a natural gas rig and caused a fire that continues to burn after the accident was reported on Jan. 16.

Watson said the accident at the drilling rig KS Endeavor six miles off the coast of Nigeria remains under investigation and that 152 personnel were safely evacuated.

“We’re very concerned,” Watson said.

On the long-running Ecuador lawsuit, Watson reiterated Chevron’s legal position in the dispute, which stems from pollution allegedly left behind by Texaco before Chevron bought the oil firm more than a decade ago.

“We still have many defenses,” he said of the company’s “confusing” legal battle in Ecuador. “It’s unfortunate that we’re at this point, but when you have an elaborate fraud that’s being perpetrated against you, that’s what you have to do.”

Chevron profit rises in upstream business

Chevron’s upstream business from oil and gas production earned $5.74 billion, up from $4.85 billion, while its downstream business swung to a loss of $61 million, from a profit of $742 million.

Chevron booked a loss of $553 million on compensation and benefits and higher corporate tax charges, wider than the year-ago loss of $294 million.

During the quarter, Chevron started construction of its Wheatstone liquefied natural gas project in Australia during the quarter, and announced two natural gas discoveries in the Carnarvon Basin.

Chevron added approximately 1.67 billion barrels of net oil-equivalent to reserves in 2011, or about 1.7 times the amount of its total oil production for 2011.

“The Wheatstone Project was the largest component of our reserve adds this year,” noted CEO Watson, “and we continued to build legacy positions with additions from acquisitions in the Marcellus Shale and multiple development projects in the deepwater Gulf of Mexico,” Watson said.

Source: The Wall Street Journal

Chevron’s 4Q profit drop highlights hurdles ahead

NEW YORK — Satisfying the world’s growing energy appetite isn’t easy.

Chevron Corp., which has spent more than $20 billion a year since 2007 scouring the globe for new resources, said Friday that it is struggling to produce more oil and natural gas. Production levels last year were the lowest since 2008.

The company still expects to supply more oil in the future, but its troubles last year highlight the many hurdles the industry faces as industrial and developing nations crave more oil to grow their economies.

The U.S. predicts that oil producers will fall behind as global demand ratchets up. The Energy Information Administration estimated that the world used 88.1 million barrels of oil per day in 2011 while producing only 87.6 million barrels per day. It sees the trend continuing this year and next. Oil and gasoline prices are expected to rise as countries dip into stockpiles to cover shortfalls.

In the U.S., drivers will probably pay more for gas this year. Experts think pump prices could hit $4 by spring and stay close to that for the rest of the year.

“Can we meet demand? Maybe. But doing so is going to be more challenging and expensive,” Argus Research analyst Phil Weiss said.

Part of the drop in Chevron’s 2011 production can be explained by contracts with foreign governments that limit the amount of crude that Chevron can keep as prices rise. Chevron also is dealing with a rash of troubles at its fields and facilities around the world.

There were pipeline problems this year in Thailand, tropical storms in the Gulf of Mexico and equipment issues in the United Kingdom.

An offshore oil leak put Chevron at odds with the Brazilian government. Regulators there forced Chevron to shut down one of its offshore wells in December, and prosecutors are seeking $10.6 billion in damages. Chevron has voluntarily suspended plans to further explore the country’s oil-rich offshore region.

The company also is in an ongoing battle with Ecuador over environmental damages from oil production operations by Texaco that took place in the country more than two decades ago. Chevron bought Texaco in 2001.

In the fourth quarter, Chevron Corp.’s profits slipped by 3.2 percent to $5.12 billion, or $2.58 per share. The results fell short of Wall Street forecasts of $2.86 per share, and shares dropped $2.63, or 2.5 percent, to close at $103.96.

Profits from Chevron’s exploration and production business increased, despite weaker production, because the company sold oil at higher prices. International natural gas prices also rose in the quarter.

Despite the 2011 slowdown, Chevron’s future production still looks “on track to meet our goals,” Chairman and CEO John Watson said. The company expects to pump 3.3 million barrels per day by 2017, a 23.5 percent increase from 2011 levels.

Chevron’s refining business struggled, as falling prices for retail gasoline and other fuels made it harder to pass along higher oil costs to customers. Chevron’s U.S. refining operations lost $204 million from October to December. International refining profits fell by 46.4 percent.


For the full year Chevron earned $26.9 billion, or $13.44 per share, compared with $19 billion, or $9.48 per share in 2010. Annual revenue increased 23.3 percent to $253.7 billion.

Earlier in the week, ConocoPhillips reported a 66 percent increase in quarterly earnings, though much of that came from the sale of a pipeline and other assets. ConocoPhillips said its production fell 8 percent last year while it aggressively shed assets. Occidental Petroleum Corp. said it increased oil production about 4 percent last year while boosting profits 35 percent in the final three months of the year.

Exxon Mobil Corp. and Royal Dutch Shell are expected to announce their fourth-quarter results next week.

Source: The Wall Street Journal



~ by FSVSF Admin on 30 January, 2012.

2 Responses to “Amazon Pink Dolphin’s Voice on Chevron: Exclusive: Chevron to face charges over Brazil spill”

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