February 21, 2013 12:48 am

Brazil drops criminal charges over spill

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A Brazilian judge has dropped criminal charges against Chevron and Transocean for an oil spill off the coast of Rio de Janeiro in 2011, offering reassurance to foreign investors in the industry.

The US oil company and its drilling partner in Brazil said on Wednesday that a judge had dropped the case, which threatened to send 17 of their employees to prison for up to 31 years.

The companies still face civil charges totalling R$40bn ($20.4bn) for the spill in November 2011, which was less than a thousandth of the size of BP’s 2010 Gulf of Mexico spill, as well as for another leak last year of less than one barrel of oil.

Both the criminal and civil charges against Chevron and Transocean were brought by Eduardo Santos de Oliveira, a lone federal prosecutor in Rio with a history of waging legal crusades against large oil companies.

However, the federal government made little effort to step in to defend the companies amid a public outcry over oil spills in the region following the Gulf of Mexico incident.

“What happened to Chevron raised a lot of concerns and fears among investors that the same thing could happen to them,” said João Augusto de Castro Neves, an analyst at Eurasia Group.

While the “overreaction” to the spill did not come from the government itself, the harshness of the charges levied against Chevron and Transocean still gave investors the impression that foreigners were not welcome in the industry, said Mr Castro Neves.

Tough local content regulation in Brazil’s oil and gas industry already keeps participation by foreign companies to a minimum.

However, Mr Castro Neves said the decision this week to drop the criminal charges against the companies’ employees – including George Buck, who was Chevron’s head in Brazil at the time of the spill – boded well for the groups in terms of the remaining civil lawsuits.

“I imagine they will settle for a lower figure,” he said. ANP, Brazil’s oil and gas regulator, fined Chevron only R$35.1m for the spill in 2011.

About 3,700 barrels of oil flooded into the Atlantic Ocean when workers encountered unexpected pressure digging a well at Chevron’s Frade field about 230 miles off the coast of Rio.

“We are committed to resolving any remaining issues surrounding this incident as well as sharing important lessons learned that will benefit future operations in Brazil,” Chevron said in a statement on Wednesday.

Transocean welcomed the court’s decision. “Transocean’s crew members did exactly what they were trained to do, acting responsibly, appropriately and quickly,” the group said.

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