UPDATE: Chevron Asks Brazil Oil Regulator To Suspend Frade Operations

Chevron Corporation (CVX) on Thursday said it has asked Brazilian authorities to allow a temporary shutdown of production from its Frade oil field off the coast of Brazil after a new oil seep was detected.

"The decision to request the temporary shut-in of production is a precautionary measure," Chevron said in a statement. "Chevron has identified a small new seep in the field and subsidence in the area."

This latest development comes after a drilling accident at Frade on Nov. 7 caused an oil spill at Frade, which lies in deep Atlantic waters off the coast of Rio de Janeiro state. An estimated 2,400 to 3,000 barrels of crude oil to seep into the sea from cracks in the seabed.

Chevron was ordered to stop new drilling at the site, but was allowed to continue production from existing wells. Brazilian authorities have levelled a number of fines. Additionally, Chevron and rig operator Transocean Ltd. (RIG, RIGN.VX) also face a 20 billion Brazilian real ($11.8 billion) civil suit.

Rafael Williamson, a director at Chevron, on Wednesday told reporters at a press conference in Rio de Janeiro that he didn't know how long it would take the authorities to approve the production halt at Frade.

The company opted for the shut down as a precautionary measure, as the Frade field is "relatively complex," he said.

A spokeswoman for the ANP said that Chevron's request hadn't been formally filed. "The request still has to be made," the spokeswoman said.

Chevron noted the spill on March 4, and after cleaning and investigating the area, it notified the authorities on March 13, within the legal time frame, Williamson said.

The Frade field currently produces about 60,000 barrels per day, the company said. Following an order from the oil regulator, the ANP, in December, Chevron suspended water reinjection in four wells in the field.

The new fissure is about 800 meters long, and lies about three kilometers away from the original problem back in November, and the two aren't connected, said Chevron engineer Mauro Pagan.

Chevron said it will conduct a technical study and prepare a complementary study to better understand the geological features of the area, working with its partners and seeking necessary approvals from the oil regulator, the ANP.

Chevron has a 52% operating interest in Frade, while Brazil's Petroleo Brasileiro SA (PBR, PETR4.BR) owns 30% and Japao Petroleo Ltda., a joint-venture company of Inpex, Sojitz and Jogmec, owns the remaining 18%.

The company has been treated fairly in Brazil, and that the incidents at Frade haven't altered its plans to invest in Brazil, Williamson said.

-By Diana Kinch, Dow Jones Newswires; +55 11 3544 7082; brazil@dowjones.com

--Matthew Cowley in Sao Paulo contributed to this article

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