Brazil Faults Chevron For November Leak And Increases Spill Estimate
Brazilian oil regulator ANP released its statement regarding the investigations over the November spill at the Frade fields. According to the regulator, Chevron (NYSE:CVX), could have avoided the spill by following ANP regulations and industry best practices. [1] The investigation has also increased the estimated size of the spill by about 40% to 155,000 gallons. The complete report will be released later and is expected to influence the ongoing legal case against Chevron, suing the company for about $20 billion.
We have a $110 price estimate for Chevron, which is in line with its current market price.
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Maximum penalty
According to ANP, the November spill could have been avoided had Chevron followed the regulator’s guidelines and industry practices as well as its own procedure manual. The report also increased the estimated size of the spill from 110,000 gallons to about 155,000 gallons. [1] Chevron still maintains that that the original estimates are accurate. The agency has said that it would impose the maximum penalty possible under Brazilian law of about $25 million on Chevron for the incident. However, Chevron could face additional penalties from civil and criminal cases filed against it for its role in the spill.
Chevron responded to the statement by saying that it did not agree with the report’s characterization of its “safety culture.” [1] The company has maintained that its response to the incident was in-line with industry best practices and that its actions during the entire episode were appropriate.
On the bright side for Chevron, the agency has indicated that it had no objection against the company restating production at the fields. The shutdown was responsible for a 2.5% drop in the energy giant’s international crude output. However, drilling and water injection at the site will remain suspended.
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