Chevron's Spill in Brazil Gets Complicated

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NEW YORK ( Trefis) -- Chevron's ( CVX) troubles in Brazil took a turn for the worse as a new sheen was discovered near the Frade fields.

The news was followed by a court decision that some of its executives could not leave the country as prosecutors look to file charges against the company as well as some of its top executives for an oil spill in November last year at the same location.

The list of executives barred from leaving the country includes George Buck, who heads Chevron Brazil. Production at the field is being shut down after the company put forth plans to stop production at the field to better understand the geology of the field. A few officials of rig operator Transocean ( RIG) have also been barred from leaving Brazil.

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The Brazilian government has taken a tough stance against Chevron and Transocean for the November spill, which resulted in the leakage of around 3,000 barrels of crude into the ocean. Chevron's drilling rights in the country have been suspended and the company has had to face multiple fines. Prosecutors also filed for a $10.6 billion lawsuit against the energy major.

The Frade fields, one of Brazil's largest, produces close to 60,000 barrels of oil a day. Chevron has a 52% operating stake in the field and has spent around $2 billion on its development. The company is moving to shut down the output at the field after it detected a leak at the location. It is not clear whether the latest leaks are related to the earlier spill.

Deepwater exploration in Brazil and other places such as West Africa are an important part of Chevron's strategy to raise output by 20% till 2017. Observers say that the tough reaction from the Brazilian government towards the spill and the legal issues faced by the company in Ecuador may push Chevron to rethink its strategy in Latin America. The company's growth plans in the region will have an important bearing on its long-term output levels.

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This commentary comes from an independent investor or market observer as part of TheStreet guest contributor program. The views expressed are those of the author and do not necessarily represent the views of TheStreet or its management.