Transocean: Contract Requires Indemnification by Chevron

On or about November 7, a hydrocarbon release occurred in the vicinity of a development well being drilled by Chevron off the coast of Rio de Janeiro in the Frade field with a semisubmersible drilling rig, the SEDCO 706, owned by a subsidiary of Transocean.

The incident involved the release of hydrocarbons from fissures in the seabed. The development well was killed and the oil spill, estimated by Chevron to be approximately 2,400 barrels, is being contained by Chevron. There are no reports of the oil spill reaching the shoreline.

The oil spill has given rise to investigations and a civil lawsuit by a federal prosecutor against Chevron and Transocean. The lawsuit, filed on December 14, 2011, in the federal court in Campos, Brazil, seeks damages from both companies and suspension of their activities in Brazil. Transocean has not been served with this action.

On December 21, 2011, a Brazilian federal police marshal issued a report to the federal prosecutor in Rio de Janeiro, Brazil, in connection with the release, recommending the indictment of a Brazilian subsidiary of Transocean and five of its employees along with a Brazilian subsidiary of Chevron and several of its employees.

Transocean's drilling services contract with Chevron for the SEDCO 706 requires Chevron, among other things, to indemnify Transocean for pollution or contamination based claims arising below the surface of the water.


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