Chevron (NYSE:CVX) could be soon be able to restart production at its offshore Frade fields in Brazil, according to the state regulatory agency ANP.  The oil major stopped production from the fields in March after a sheen was discovered in the region following a spill at the fields in November last year. The production stoppage was the major reason for the 30,000 barrels/day drop in the company’s international crude output in the last quarter. Earlier, the regulatory body said that it could impose penalties of up to $25 million due to infractions related to the November spill.
We have a $109 price estimate for Chevron, which is in line with the current market price.
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Chevron voluntarily shut down production at the Frade fields in March after an oil sheen was spotted in the area. A few months before that in November, a spill at the Frade fields resulted in the leakage of around 3,000 barrels of oil. ANP is set to release its report on the accident later this week, nailing the company for up to 25 safety violations, which could result in penalty of up to $25 million.  The stoppage of production, however, resulted in a material drop in Chevron’s global crude output in the last quarter. According to its interim results, the company’s international crude output fell by about 2.5% in Q2, mainly because of the loss of output from Frade.
The state regulator has said it has no objections against Chevron restarting production at the fields.  However, drilling and the injection of water into the reservoir will remain suspended. ANP is examining whether the practice of injecting water into the wells could contribute to the oil seepage. The report could also have an influence on the legal proceedings against Chevron. The company has been sued for around $22 billion for its role in the November leak and the following seepage.
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- UPDATE 1-Chevron could restart output from Brazil spill field soon, Reuters [↩] [↩] [↩]