Brazil ups pressure on Chevron with well closure

RIO DE JANEIRO, (Reuters) – Brazil’s government  ordered Chevron Corp yesterday to shut one of its   wells in  an offshore field where the oil company has come under intense  scrutiny following an accident at another well that spilled  thousands of barrels of oil.

The decision by the ANP oil regulator followed last month’s  accident in the same area, which spilled about 2,400 barrels of  oil into the ocean.

The second-largest U.S. oil company was fined $28 million –  a figure that could at least triple -, had its local chief  executive hauled in front of Congress and then had its  Brazilian drilling rights suspended as punishment for the  undersea leak.

ANP director Magda Chambriard said yesterday the agency  has ordered Chevron to shut down a well in the Frade offshore  field, where last month’s accident occurred, because the firm  had failed to report the presence of sulfur from the well.

The burning of fuels made from oil and natural gas  containing sulfur can create dangerous gases such as sulfur  dioxide which can harm humans and the environment.

The ANP does not ban the production of sulfur but requires  firms to have a prevention plan and to inform authorities of  what is done with the material, Chambriard said.

“Companies have to report the risks they are facing and  show that they are being controlled and minimized,” she told a  news conference in Rio de Janeiro.

She said Chevron would receive another fine for the  offense, but did not specify the amount. Chevron officials in  Brazil were not immediately available for comment.

Chevron, which has taken full responsibility for the  relatively small spill, last month capped and abandoned the  evaluative well that ruptured in the same field and caused the  accident.

The spill is likely to increase politicization of the  governance of the country’s oil sector, which has already  shifted to a more state-centered approach since the discovery  of huge reserves off the Rio coast in recent years.

It has led to concern that Chevron could be excluded from  future opportunities in the offshore fields and has already  given ammunition to Rio state lawmakers fighting proposals to  share more oil wealth with non-producing states.

The Nicaragua-sized “subsalt” area, which includes the  Frade concession, may hold 100 billion barrels of oil or more,  according to a study from the National Oil and Gas Institute.

Brazil’s government sees the fields as a ticket to  developed status that could make it the world’s third or fourth  biggest oil producer by 2020, but it faces huge technological  and financial challenges to tap the ultra-deep reserves.

Chevron owns 52 percent of Frade, while Brazil’s state-run  oil company Petrobras owns 30 percent and  Frade Japao 18 percent. Frade has 10 production wells,  including the one ordered closed on Thursday, and produces  79,000 barrels per day of oil, or 4 percent of the country’s  output.