Offshore Update: Brazil

By MarEx 2012-10-11 09:34:52

Petrobras Comes to the Rescue of Transocean and Chevron

Last November Brazilian authorities detected a spill of between 521 and 882 barrels of oil at a well operated by Chevron Brazil and Transocean in the Campo de Frade field in the Bay of Campos. After a few days the spill covered an area of 163 square kilometers, and the Brazilian Institute of the Environment and Renewable Natural Resources fined the operators $28 million for letting 2,400 barrels of oil escape – the first such fine ever. In March 2012, the Federal Public Ministry of Rio de Janeiro formally denounced the spill and filed criminal charges against 17 officials of Chevron Brasil and Transocean.

Shortly thereafter the United Federal Petroleum Workers Union filed a civil suit in the federal court of the Second Region in order to cancel the Campo de Frade oil concession issued to Chevron. On August 2 the same court issued a sentence against the American oil company, ordering it to suspend all activities in Campo de Frade within 30 days. However, on August 15 Petrobras made a public announcement that it was making its legal department available to Chevron and Transocean to help prepare their defense against the court order.

According to Jose Formigli, Petrobras’ Director of Exploration and Production, the offer was made because the shutdown of Chevron’s activities would have the unintended – and unforeseen – effect of halting the construction of eight scanning probes that Transocean had planned for deepwater exploration, probes which are necessary to increase production in the area. Nonetheless, on September 12 the court ruled against the two North American oil companies, ordering them to cease all operations in the region and imposing a fine of $20 million for the socio-economic damages caused to the environment.

But the story doesn’t end there. On September 28, a few days after Transocean issued its pink slips, Petrobras was able to get the order lifted through a ruling by the Superior Court of Justice. Stay tuned. No doubt there’s more to come.

Petrobras to Sell Holdings in Gulf of Mexico to Increase Production in Brazil

The President of Petrobras, Maria das Graças Foster, confirmed that the company has hired Morgan Stanley to help it divest assets in the Gulf of Mexico worth about $8 billion in order to raise capital to reduce its enormous outstanding debt. The Gulf of Mexico sale is part of a $14.5 billion divestment plan to offset expenses and increase investment in its Brazilian “presalt” oil deposits. In August Petrobras’ domestic production fell to 1.92 million barrels per day, its lowest of the year and a far cry from the 4.2 million b/d projected by 2020.

The company recently reported a net loss of $665 million in the second quarter – its first quarterly loss in 13 years – compared with a profit of $1.5 billion in the same quarter last year. Among the companies interested in purchasing Petrobras’ Gulf of Mexico assets are BP, Royal Dutch Shell, Exxon Mobil and Chevron. – MarEx

Mauro Nogarin is MarEx’s Offshore Correspondent for South America.