Brazil Prosecutors Move Forward in Chevron Oil Spill Case|
Jan. 30, 2012
Published by Minyanville
Following a relatively small oil spill in November 2011, Brazilian prosecutors are gearing up to file charges against Chevron (CVX) and Transocean (RIG) within weeks, threatening prison sentences for executives as well as an $11 billion fine, reports Reuters.
Around 2,400 barrels of oil were spilled off the coast of Rio de Janeiro in early November. The figure is smaller even than the total amount spilled by state oil company Petrobras (PBR) last year. However, prosecutors are keen to scapegoat the US firms in what is thought to be a politically motivated message to other companies hoping to profit from the oil-rich region as the industry soaks up $225 billion worth of investment over the next five years.
Chevron’s chief executive for the country, George Buck, will likely feature among other Chevron and Transocean staff in a request for criminal indictment to be filed to a federal court in Campos.
“Chevron believes that the charges are without merit,” spokesman Kurt Glaubitz told Reuters. “Chevron is confident that once all the facts are fully examined, they will demonstrate that Chevron responded appropriately and responsibly to the incident.” The company, the second-largest US oil firm behind ExxonMobil (XOM), added that it acted quickly and the leak was dealt within in a matter of days.
No oil reached Brazil’s shoreline, and less than a barrel remains on the water’s surface. Still, the move by Brazilian authorities appears to be part of a bigger trend in active pursuance of polluters. Analysts are concerned, however, that this may backfire and ultimately hamper Brazil’s hopes to push oil output to 7 million barrels per day by 2020 -- a target which, if reached, will usurp the United States’ position as the world’s No. 3 oil producer after Russia and Saudi Arabia.
The companies are sure to have years of litigation ahead of them, which is unlikely to end in the huge fines and prison sentences mentioned, according to analysts. However, the news will add to the already considerable workload for Chevron’s lawyers as they face a separate $11 billion lawsuit in Brazil as well as an $18 billion judgement in Ecuador.
Despite these cases, Chevron’s shares were up 0.37% as the news came out late Thursday, while the world’s biggest offshore rig operator, Transocean, saw shares up 3.62%.
However, Friday saw news that 2011 fourth-quarter profit for Chevron was down 3.2% -- knocking shares down 2.2%.
The US Food and Drug Administration has seized three shipments of Brazilian orange juice, as well as six from Canada, that tested positive for carbendazim, a fungicide banned from citrus products in the US. More Brazilian shipments tested positive but were held back before entering the US.
The fungicide is not harmful to health in the small quantity that acts as the threshold for the FDA, 10 parts per billion, but becomes a problem above several thousand parts per billion.
Brazilian exporters are therefore in talks with the FDA, hoping to push them to raise the accepted levels of the fungicide, used in Brazil to treat blossom blights and black spot.
Christian Lohbauer, a spokesman for CitrusBR, the association of Brazil's main orange juice producers, said they have met with officials from the FDA and are expecting a response in the coming days. He added that concentrated juice should be allowed five or six times the accepted levels of the fungicide.
The European Union allows up to 200 parts per billion of residue of the fungicide on oranges. Japan and Canada allow even more.
It was Coca Cola (KO), manufacturer of Simply Orange and Minute Maid, that sparked the original FDA testing after discovering carbendazim in orange juice imported from Brazil in December.
The results were widely expected. Orange juice futures climbed just under 3% on the news.
The Central Bank in Brazil announced, somewhat brazenly, that the benchmark interest rate is likely to soon fall below 10%, after the country’s sharp slowdown in the latter half of last year.
The bank last cut the rate on January 18 to 10.5%.