New Oil Seep Prompts Chevron to Suspend Frade Ops in Brazil
Chevron Corporation 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.
Brazil's federal environment body Ibama said in a statement late Thursday it is monitoring the new Chevron incident, which it doesn't classify as an oil spill but rather an oil outcrop as it didn't originate from a producing well.
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.
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