Date: 28-Dec-11
Country: BRAZIL
Author: Marcelo Teixeira & Braden Reddall

A Chevron sign is displayed at a gas station in Buckeye, Arizona October 27, 2011.
Photo: Reuters/Joshua Lott

Brazil's environment inspector fined Chevron Corp 10 million reais ($5.4 million) for breaching the terms of the U.S. oil company's environmental license when tackling an offshore spill at a well it drilled in November.

The fine on Friday is on top of a 50 million reais charge the inspector, Ibama, slapped on Chevron for causing the spill at the Frade field when rock gave way due to a pressure surge. Chevron estimates 2,400 barrels of oil spilled into the sea.

The fines pale into insignificance against the $11 billion lawsuit Rio de Janeiro state prosecutors are trying to bring against the company for a spill analysts consider fairly minor and which never reached the country's shores.

Ibama said the latest fine was for Chevron's failure to adhere to the Individual Emergency Plan set out in the environmental license that it needs to operate. Ibama said Chevron lacked necessary equipment and was slow to respond to the leak.

But Chevron said it properly followed the emergency plan, which had been approved by Ibama.

"The plan was deployed rapidly and standard procedures were quickly carried out in order to stem the source of the leak. In just four days, a period considered excellent by industry experts, the company managed to control the source of the leak," the company said in a statement late on Friday.

There have been concerns that unpredictable regulation could deter big oil companies from investing in Brazil just as it starts to tap vast new oil reserves of up to 50 billion barrels discovered in 2007.

Brazil's so-called subsalt reserves lie about 7 km (4.4 miles) under the sea, making them technically challenging to reach and thus carrying potentially greater risk of accidents.

Federal police this week recommended the indictment of several officials from Chevron and rig contractor Transocean for environmental crimes and withholding information from investigators.

Transocean issued a statement late on Friday detailing some of the events in Brazil and reminding investors that its contract for the Sedco 706 rig, which Chevron operated in Brazil, required the California-based oil company to indemnify Transocean for claims arising for pollution below the surface of the water.

(Editing by Dale Hudson, Bob Burgdorfer and Yoko Nishikawa)

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