Global Fugitive Campaign


Chevron Under Fire in Brazil

Chevron's stake in Brazil's booming oil industry is now at risk, thanks to the company's misconduct in Ecuador. On June 27, the Ecuadorians' Brazilian lawyer, Sergio Bermudes, filed suit in the Superior Tribunal of Justice in Brasilia, the nation's capital, asking the court to seize Chevron's assets in the country. Bermudes, one of Brazil's top litigators, made his name as a human rights crusader defending torture victims during the military junta. Though he now mainly represents large corporations in Brazil, Bermudes took on the Ecuador case because he viewed Chevron's conduct there as a "gross violation of fundamental human rights."
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Fast-Growing Operations, Big Ambitions

Chevron has major offshore operations that would be subject to seizure if Brazilian courts recognize the Ecuadorian judgment. These assets produce a daily average of 33,000 barrels of crude oil and 13 million cubic feet of natural gas. But they represent only a tiny amount of what Chevron hopes to produce in coming years. Brazil's deepwater "pre-salt" oil reserves are estimated at 50 billion barrels, only slightly less than all the petroleum remaining under the North Sea.

Chevron's holdings in Brazil include interests in three deepwater oil fields in the Campos Basin: Frade, Papa-Terra and Maromba. Frade Field is one of the largest deepwater heavy oil projects in the world, and one of Chevron's biggest capital investments globally. The company holds a 51.7 percent interest in the project. In 2011, net daily production in the fields averaged 33,000 barrels of crude oil and 13 million cubic feet of natural gas. Chevron also owns and operates a lubricant plant outside of Rio de Janeiro, a grease and coolant plant outside of Sao Paolo and an Oronite additive manufacturing plant near Sao Paolo.

Chevron's Oil Spills

For Chevron, the parallels between Ecuador and Brazil run deep. Among the Brazilian public, Chevron has developed a reputation for oil pollution and stonewalling. As a result of the company's oil spills in November 2011 and March 2012, Chevron faces a whopping $22 billion in civil damages and its president in Rio, George Buck, could face upwards of 31 years in prison.

On November 7, 2011, a Chevron oil well 120 km (75 miles) off the coast of Rio de Janeiro began to leak. The company's engineers had dramatically underestimated the amount of pressure in the reservoir, so they chose the wrong drilling fluid or "mud" to use in the drilling process. The pressure from the reservoir overcame the drilling fluid and oil began to flow back up the bore-hole. The well's blowout preventer—the same piece of equipment that failed during the 2010 Deepwater Horizon explosion in the Gulf of Mexico—quickly shut off the well. Chevron thought that the problem had been solved.

But the next day, workers on another drilling rig noticed a slick on the ocean surface. At first Chevron denied having anything to do with the spill. Later, Chevron admitted that the well structure had cracked, letting as many as 3,000 barrels of oil spill into the ocean.

The spill took four days to clean from the surface. As a result of the spill, Brazil's National Petroleum Agency and environmental regulators have fined the company 200 million reais ($110 million). Federal prosecutors have filed an $22 billion civil lawsuit over the spill, the largest environmental suit in Brazil's history.

The government has charged Chevron with various kinds of negligence: failure to contain the leak; failure to take steps to kill the well and stop the drilling process; breach of licenses, legal norms and regulation, including altering documents; and failure to meet legal and contractual duties.

Three months later, a Brazilian navy plane spotted a second oil sheen above a different section of Frade, and on Mar. 21, the government filed criminal charges against 17 top employees of Chevron and its main drilling contractor, TransOcean, the same driller as the 2010 Deepwater Horizon disaster spill in the Gulf of Mexico.

At a post-spill meeting with securities analysts, Chevron CEO John Watson said the company wants to be "a player in Brazil for a long time." But with the Brazilian federal lawsuits expected to drag on for years, Watson hedged his bets, adding, "it remains to be seen."