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Chevron Brazil ban overturned, paving way for oil restart

An aerial view shows oil that seeped from a well operated by Chevron Copr. at Frade, on the waters in Campos Basin in Rio de Janeiro state Nov. 18, 2011.

Handout/Reuters

Chevron Corp.'s efforts to restart oil output in Brazil received a boost after a court overturned a ban on operations and the company agreed with prosecutors on a plan to improve safety and operating procedures after a November 2011 oil spill.

The ban was overturned by appeals-court judge Guilherme Dienthaeler of Brazil's Second Regional Federal Tribunal in Rio de Janeiro, court press officials told Reuters Friday. Details of the ruling are unlikely until next week, the officials said.

Prosecutors won the injunction banning Chevron, the No. 2 U.S. oil company, and its drilling contractor Transocean Ltd. in July. The injunction sought to assure payment of $20-billion in damages for alleged spill-related environmental damages, in Brazil's largest ever environmental lawsuit.

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As long as the ban held, Brazil's oil regulator, the ANP, said it would be unable to consider a petition to restart oil output in Frade, the field where the spill occurred. The ban stood even though Chevron accepted a July report criticizing its drilling plan and levying citations and fines.

In a related development, Chevron and Transocean agreed to a plan to change offshore safety and operating procedures, a spokeswoman for federal prosecutors told Reuters on Friday.

If a final agreement is reached after public consultations, the plan will be presented to the Federal judge hearing the lawsuit. That could help the companies by showing their willingness to improve Brazil's oil industry, the prosecutors' office in Rio de Janeiro said.

The agreement, known as a "change-of-conduct accord," was drafted at the companies' request with the same federal prosecutors who are handling two civil lawsuits against Chevron and Transocean, the prosecutors' office said.

The office declined to give details of the accord but said they would be presented at a public hearing on Dec. 14 in Rio de Janeiro by federal prosecutor Gisele Porto.

Chevron's press office in San Ramon, Calif., confirmed the overturn of the ban, but declined to comment further or comment on the change-of-conduct accord.

Transocean's press officer in Houston declined to comment. Both companies say they committed no crime and acted correctly during and after the spill.

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Ms. Porto is lead prosecutor on the civil lawsuits against Chevron and Transocean, the world's largest offshore oil drilling rig operator, for the 3,600-barrel spill in the Frade field, northeast of Rio de Janeiro.

No one was hurt in the Frade accident. No oil reached shore and there was no discernable environmental damage, according to Brazil's petroleum regulator, the ANP.

The Frade field was producing 62,000 barrels of oil per day when it was shut in March to examine unexplained leaks in the area around the site of the November 2011 spill. Tests determined that the leaking oil was not from Chevron's reservoirs.

Frade is operated by Chevron, which also owns 52 per cent of the field. Brazil's state-led Petrobras owns 30 per cent, and Frade Japao, owned by Japanese trading houses Sojitz Corp and Inpex Corp, has an 18-per-cent stake. Neither Petrobras nor Frade Japao is the subject of spill-related prosecutions.

Chevron, Transocean and 17 of their employees and executives also face criminal charges that can carry financial penalties and jail terms of up to 31 years.

The spill was not as severe as other recent offshore accidents. More than five million barrels of oil were spilled in the 2010 Deepwater Horizon disaster in BP PLC's Macondo field in the Gulf of Mexico. Eleven people died in the accident and beaches and fishing grounds were polluted.

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On Nov. 15, BP agreed to pay a record $4.5-billion in penalties and plead guilty to criminal misconduct for the disaster.

While criticizing some of Chevron's actions and levying $16.6 billion in fines on the company, the ANP said in a July report that there was no negligence in the 2011 spill. The ANP said Transocean had no responsibility for the spill.

Both companies have said they will challenge the civil and criminal cases against them.

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