Chevron Faces Criticism over Oil Spill (CVX)

Brazilian officials have criticized oil and gas major Chevron Corporation (NYSE: CVX) over an oil spill at an offshore field the company operates. The company has been threatened with fines by federal investigators in Brazil over the incident and some of its officials face potential prison terms if they are found guilty of violating environmental contamination laws.

Chevron was informed about the oil spill on November 8. The spill has left oil sheen near Brazil’s southeast coast. It will be interesting to see how Brazil responds to the spill, considering that the country is moving to tap oil from its large recent offshore discoveries. Brazil has set itself ambitious production targets and if the country meets them, it could emerge as the world’s fourth-largest oil producer by 2020.

The oil spill took place from an appraisal well in the Campos Basin. According to Brazil’s environmental protection agency, nearly 110,000 gallons of oil may have spilled into the Atlantic Ocean due to the leak. Environmental officials estimate that between 8,400 to 13,800 gallons of oil leaked each day from November 8 through Tuesday. This is much higher than what Chevron claims leaked into the ocean.

The leak is almost entirely contained even as officials continue to investigate the reason behind the incident. According to an official at Brazil’s Federal Police, Chevron drilled around 500 meters farther than they were licensed to do. The official, who did not wish to be named, cited a person with knowledge of the drilling for the information.

Carlos Minc, Environment Minister for the state of Rio, said that the leak is much larger than what Chevron estimated. Speaking to Globo TV network, Minc called for more transparency from the San Ramon, California-based company. He said that we can’t trivialize this and its really serious and we don’t yet know all the consequences.

Post Written By: Ed Liston Ed Liston is a senior contributing editor at TheStockMarketWatch.com. An active market watcher and investor, Ed guides an independent team of experienced analysts and writes for multiple stock trader publications. He is widely quoted in various financial publications on the Internet. When Ed is not writing about stocks, investing in stocks, talking about stocks, or otherwise doing something stock related, he likes to go sailing and fishing in his yacht.