Chevron, Transocean in $11 bln Brazil oil suit

RIO DE JANEIRO (Reuters) – Brazilian  prosecutors sued Chevron Corp, the No. 2 U.S. oil  company, and top offshore oil rig operator Transocean Ltd    for 20 billion reais ($10.6 billion) over  their alleged roles in a November oil spill near Rio de Janeiro.

The civil suit filed by federal prosecutors in Rio de  Janeiro state also seeks to suspend the companies from operating  in Brazil, the prosecutor’s office said in a statement on its  website on Wednesday, a move that could halt operations of the  10 Transocean offshore drilling rigs operating in the country.

“During investigations the prosecutors found that Chevron and  Transocean were not capable of controlling the damages caused by  the leakage,” the statement said. “This is evidence of a lack of  planning and environmental management by the companies.”

Some legal experts said the action may be a politically  motivated suit that could be difficult to win given Brazil’s  extensive oil regulations, the case’s technical complexity and  the lack of evidence to date of serious negligence or  wrongdoing.

The case will add to already-large legal headaches for both  companies. Chevron has already faced years of litigation over  alleged pollution by Texaco, a company it bought, in Ecuador’s  Amazon region decades ago.

Chevron was ordered by Ecuadorean courts in February to  pay damages of $18 billion. The suit is now under appeal in  Ecuador, and the dispute is also being reviewed by an  international arbitration tribunal. Transocean was the rig  operator in the giant four-billion-barrel Deepwater Horizon  spill in the Gulf of Mexico in 2010.

The suit could also jeopardize oil companies’ plans to step  up their presence in Brazil after the discovery of huge offshore  reserves several kilometers (miles) beneath the ocean floor  estimated at 50 billion barrels or more.

Reaching that oil will be technically challenging but Brazil  expects it will push its crude output to 7 million barrels a day  by 2020. That could see it challenge the United States for the  rank of world No. 3 oil producer after Russia and Saudi Arabia.

It also risks alarming foreign oil companies eager to expand  in one of the world’s fastest-growing oil frontiers, where  state-controlled oil company Petrobras accounts for  more than 90 percent of the output, and government leaders are  moving to assert even greater control of natural resources.

Chevron, which has said it takes full responsibility for the  spill, said it has not received any formal notice of the suit  and that the spill was staunched in four days with minimal or no  damage to the environment.

Transocean had similar comments.

“We have not received a formal notice of this action. At  present, our rigs are operating in Brazilian waters and we  continue to cooperate with the authorities,” it said in a  statement to Reuters.

Chevron shares ended nearly 3 percent lower on Wednesday  while Transocean stock fell 3.9 percent, both on the New York  Stock Exchange.

 “NEW TERRITORY”       

“We are really entering new territory here,” said Marilda  Rosado De Sa Ribeiro, a lawyer and former official at Brazil’s  oil agency, the ANP. “There are high hurdles to make a technical  case like this work, but the public prosecutors are professional  and serious.”

The government of Brazilian president Dilma Rousseff has  been expanding the funding and training of the public  prosecutors’ office, helping the prosecutors realize their  constitutional role as national watchdog and win more  high-profile cases against corruption and environmental  wrongdoing, said the lawyer, a partner at Doria, Jacobina,  Rosado, Godinho in Rio de Janeiro.

On the other hand Brazil’s legal system allows a large  number of appeals and few major cases are settled quickly,  meaning that even if successful, Chevron and Transocean could  operate for years before facing any fine or sanction.

San Ramon, California-based Chevron has already assumed  responsibility for leaking what it estimates at 2,400  barrels of oil into water off the coast of Rio de Janeiro. It  has been fined $28 million by environmental authorities for the  spill, and its local president has made a public apology before  Congress.

The public outrage at Chevron, which did no damage to  beaches and has left less than a barrel of oil on the ocean  according to Chevron, has led some to suggest the prosecution  may be based more on politics than the law.

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