RIO DE JANEIRO (Reuters) - Chevron (CVX.N) said on Friday it planned to invest $3 billion in Brazil over the next three years, despite uproar in the South American country after an oil spill this month caused by its offshore drilling.
Chevron was ordered to halt its drilling in Brazil this week pending investigations by the Federal Police and other authorities, after an estimated 2,400 barrels of oil leaked from its Frade field off Rio de Janeiro’s coast.
Chevron’s Head of Latin America and Africa operations, Ali Moshiri, said planned investments were on top of $2.1 billion the oil giant has already invested in Brazil since 1997. He said Chevron was looking out for profitable oil concessions.
“We plan to continue participating in new auctions for oil exploration blocks in Brazil, if there is creation of value and benefits,” Moshiri said in a press conference in Rio de Janeiro.
Talk of expansion comes after the second-largest U.S. oil firm was fined $28 million by Brazil’s environmental agency for the spill, an amount likely to rise when the energy regulator and Rio’s state government fines as they have promised to do.
Auctions for oil concessions in Brazil are now suspended as the country draws up new policies for the sector that is on the verge of rapid expansion after the discovery of massive ‘subsalt’ offshore reserves deep under a layer of salt rock.
Moshiri said the planned investment was mainly for the $5.2 billion Papa-Terra project. It has a minority stake with the project’s operator, Brazil’s state-run Petrobras (PETR4.SA). Both Papa-Terra and Frade are located in the offshore Campos basin where most of Brazil’s 2 million-barrel-per-day output comes from.
Analysts say the spill is likely to increasingly politicize the governance of the country’s oil sector. It has already given ammunition to Rio de Janeiro state’s lawmakers fighting proposals to share more oil wealth with non-producing states.
Moshiri, described as premature the government’s ban on its drilling, which it had already halted voluntarily shortly after the oil leak was discovered. It said the crude leaked from fissures in the seabed after rock “parted” during drilling.
He said the company had not given up on plans to drill another separate well at Frade that would perforate through to deeper subsalt oil reserves, despite the energy regulator turning down its request for that project this week.
The regulator, the ANP, said the well would be at even greater risk of spill than the one that leaked because of the greater depths involved.
Moshiri said the spill had cost Chevron about $30 million in clean-up costs. It had invested about $20 million in the well it was drilling which it is now working to permanently seal off.
The head of Chevron’s Brazil operations, George Buck, apologized for the November 8 spill at the country’s Congress on Wednesday where he insisted the company used all its resources to stop the flow of oil which has now virtually ceased.
Chevron has acknowledged that it was mistaken in its estimates of pressure and rock strength in the reservoir it was targeting. It is the majority stakeholder in the Frade concession with Brazil’s state-run Petrobras (PETR4.SA) and a Japanese consortium.
The only rig working for Chevron off Brazil is Transocean Ltd’s RIGN.VX Sedco 706, which drilled the well that leaked.
Brazil’s national energy regulator, ANP, said on Friday the oil stain on the ocean surface many miles out to sea was shrinking but still visible.
Writing by Peter Murphy; Editing by Alonso Soto and Andrea Evans