(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 already temporarily suspended all of Chevron's activity in the deepwater Brazilian fields.
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.
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