(Brazil, Chevron story, updated to include Transocean, Chevron statement) NEW YORK ( TheStreet) -- A Brazilian federal prosecutor is asking Chevron (CVX) to pay $10.7 billion in damages related to the company's recent oil spill in its offshore Frade field.
According to a statement sent by Brazilian federal prosecutors to
Bloomberg, Brazil will ask Chevron to suspend all activity in Brazil and pay a 20 billion reais fine (or $10.7 billion) through a civil suit. Brazil has
To put the $11 billion proposed fine in perspective, it would work out to something like $4 million per barrel of oil spilled. That compares with a maximum fine -- if BP (BP) is proven to be grossly negligent -- of $4,300 per barrel in the Macondo spill. BP is looking at between $17 billion to $21 billion in total fines if it is proven grossly negligent. For comparison, the Chevron spill is estimated between 2,000 and 3,000 barrels, while the BP spill has been estimated at 3.2 million barrels.
Transocean (RIG) was also named in the lawsuit. Transocean was the rig operator in Chevron's Frade field and BP's Deepwater Horizon rig disaster."Chevron and Transocean weren't capable of controlling the damages from a spill of 3,000 barrels of oil, which proves a lack of environmental planning and management," the prosecutor's office said in an e-mailed statement to Bloomberg. Chevron shares declined steeply after the Bloomberg headline, on top of the losses of 2% already booked by the energy sector on Wednesday. Its shares were down 4% after the news broke, though it ended trading down 3%, only slightly worse than the energy sector on a losing day. Analysts on Wall Street weren't betting on this Chevron drop to last, or for the $11 billion fine to stick, either, and the wording of the Bloomberg article said that the federal prosecutor in Brazil had "asked" Chevron to pay the $11 billion. One can imagine Chevron will say no, and that Brazil really doesn't want to stick a company with an $11 billion fine in an industry where it has been anxious to increase investment and exploration with Western partners. "Seems very steep, pretty egregious," said Raymond James oil analyst Stacy Hudson.
Select the service that is right for you!COMPARE ALL SERVICES
Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.
- $2.5+ million portfolio
- Large-cap and dividend focus
- Intraday trade alerts from Cramer
- Weekly roundups
Access the tool that DOMINATES the Russell 2000 and the S&P 500.
- Buy, hold, or sell recommendations for over 4,300 stocks
- Unlimited research reports on your favorite stocks
- A custom stock screener
- Upgrade/downgrade alerts
Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.
- Diversified model portfolio of dividend stocks
- Alerts when market news affect the portfolio
- Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.
- Real Money + Doug Kass Plus 15 more Wall Street Pros
- Intraday commentary & news
- Ultra-actionable trading ideas
Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.
- 100+ monthly options trading ideas
- Actionable options commentary & news
- Real-time trading community
- Options TV