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Brazil's ANP Allows Chevron to Resume Production at Frade Field

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RIO DE JANEIRO - U.S. oil major Chevron Corp. has been authorized to restart production at the offshore Frade field in Brazil, the site of a November 2011 accident and oil spill, Brazil's National Petroleum Agency, or ANP, said late Monday.

Chevron's production startup will bring a controversial chapter in the history of Brazil's burgeoning oil industry closer to an end. Brazil was heavily criticized for the heavy-handed way regulators and prosecutors came after Chevron for what was regarded in the industry as a minor accident. Estimates were that 2,400 to 3,700 barrels of crude were leaked into the Atlantic Ocean.

The work halt proved a drag on Chevron's fourth-quarter earnings, cutting daily production by 29,000 barrels of oil and natural gas. Before the accident, Frade had been producing 60,000 barrels a day.

"Our preparations to restart will begin shortly following all safety procedures," Chevron spokesman Jim Craig said, declining to say when exactly the start-up would take place.

Oil started to seep from cracks in the seabed above the field after a drilling accident in November 2011. Operations at Frade were shuttered for good in March 2012, when oil started to seep a second time from cracks in a separate area.

In a board meeting Friday, ANP directors gave Chevron the green light to restart crude-oil production from four wells for a period of 12 months, the ANP said. Output from an additional two wells was also conditionally approved, if needed, to safely stabilize production, but only for two months, the ANP said. The ANP, however, said the partial restart of oil production was conditioned upon undisclosed changes to Chevron's plan to reduce flaring, or the burning off of excess natural gas associated with crude oil production.

ANP cited Chevron for 25 infractions related to the spill, with Chevron paying the agency more than $17 million in fines. Drill-rig operator Transocean (RIG) was absolved of any wrongdoing.

Both companies, however, faced criminal and civil lawsuits related to the spill. The criminal lawsuit was dismissed, although federal prosecutors are appealing that decision. The two civil lawsuits seek about $20 billion in damages, with Chevron offering to pay nearly $150 million to settle the case.

Chevron and Transocean have said they did nothing wrong.

Ben Lefebvre contributed to this article.

Copyright (c) 2012 Dow Jones & Company, Inc.

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