Brazilians going after Chevron

SAO PAULO (AP):

The nearly US$11-billion lawsuit Brazilian prosecutors filed last week against Chevron Corp over an offshore oil leak could scare away foreign capital needed to develop Brazil's huge offshore oil deposits, an analyst said last Friday.

Brazilian officials and environ-mentalists, however, argued that such a high amount was needed for the United States-based company to take proper responsibility for the leak.

Robert Kessler, head of US-based Pickering, Holt & Company's global integrated oil research department, said the US$10.6-billion fine that federal prosecutors are seeking is more than 700 per cent of Chevron's US$1.5-billion net capital investment in Brazil.

"That would be a poor risk/reward ratio for all companies looking to invest in the business," Kessler said by telephone from his office in Houston, Texas.

Nearly 3,000 barrels of oil spilled from an offshore well into the Atlantic Ocean last month.

"At $3.5 million per barrel that's the most expensive oil I have ever seen," Kessler said. "It is disproportionate. You don't want to scare away much-needed capital that is doing quite a bit of good for Brazil's economy."

He said the lawsuit represented "disproportionate fines without any evidence" of intentional wrongdoing on the company's part, which he said doesn't bode well for Brazil's business climate.

The prosecutors also are asking a judge to order Chevron and Transocean Ltd, the drilling contractor for the well where the leak occurred, to halt all activities in Brazilian territory for an indefinite period.

"During an investigation, the attorney general's office found that Chevron and Transocean were not capable of controlling the damage caused by the spill ... proof of a lack of environmental planning and management by the companies," the prosecutors said in filing their request.

Chevron said last Friday that it still had not received notice of the action by the prosecutors.

Karen Hinton, a US-based spokes-woman for a group of Ecuadorian plaintiffs who recently won a lengthy US$18-billion lawsuit against Chevron for environmental damage done in Brazil's neighbour, said Brazilian officials were wise to be aggressive with the company.

Not just about oil

"Brazil is smart to distrust Chevron and to assume the worst," she said in an emailed statement. "Clearly the lawsuit isn't just about the amount of oil spilled. It's about Chevron's disregard for the laws of Brazil."

Chevron has already been punished for the spill. Late last month, Brazil's National Petroleum Agency banned the company from any drilling activities in Brazil until an investigation into the leak is finished.

The Brazilian environment ministry fined Chevron about US$28 million, but has said the company could face further penalties. Chevron has not indicated if it will contest the fine in court, which it is allowed to do under Brazilian law.

Chevron is appealing the ruling in the US$18-billion Ecuadorian lawsuit and has said it is not liable for any environmental damage caused by Texaco, which is now one of its subsidiaries.

Chevron says a 1998 agreement that Texaco signed with Ecuador after a US$40-million clean-up absolves it of liability. It also says Ecuador's state-run oil company is responsible for much of the pollution in the oil patch that Texaco quit more than two decades ago.