2nd UPDATE: Chevron Asks Brazil Oil Regulator To Suspend Frade Operations
March 15 2012 - 7:43PM
Dow Jones News
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. This would mean the U.S. company temporary halts
its entire Brazil oil production.
"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 on Nov.
7 caused an oil spill at Frade, which lies in deep Atlantic waters
in the Campos basin off the coast of Rio de Janeiro state. At that
time an estimated 2,400 to 3,000 barrels of crude oil seeped into
the sea from cracks in the seabed.
Chevron was ordered to stop new drilling in Brazil, 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) face a 20 billion
Brazilian real ($11.8 billion) civil suit.
Rafael Williamson, a director at Chevron, on Thursday told
reporters that he didn't know how long it would take the
authorities to approve the production halt at Frade. The stoppage
isn't expected to last for months, he added.
The company opted for the shut down as a precautionary measure,
as the Frade field is "relatively complex," he said. "We need to
better understand its geological complexity. Chevron's emphasis is
on operational safety and respect for the environment."
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.
The ANP said Thursday that it has issued a formal warning to
Chevron that it hadn't provided the regulator with the safeguards
requested following the Nov. 7 leak to prevent new seepages in the
area. ANP said it has ordered a collector to be installed at the
new leakage point identified by the company.
Chevron noted the spill on March 4, but couldn't immediately
detect the origin of the leak, Williamson said. After cleaning and
investigating the area, the company notified the authorities on
March 13, within the legal time frame, he said.
The leak is at a water depth of 1,200 meters to 1,300 meters,
Williamson said. So far seepage of just 5 liters has been measured
from the new problem, which hasn't caused any oil slick and merely
bubbles on the ocean surface, according to the Chevron
director.
The Frade field currently produces about 61,500 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 the incidents
at Frade haven't altered its plans to invest in Brazil, Williamson
said.
Last November, Chevron said it planned to maintain investments
of $3 billion in the Brazilian oil industry in coming years.
-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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