* Police report alleges Chevron cut safety margins
* Chevron says it followed industry drilling norms
* Some see charges as unfair, say gov't shares blame
By Jeb Blount
RIO DE JANEIRO, March 19 (Reuters) - A Brazilian prosecutor
plans to allege this week that Chevron and Transocean should not
have drilled a deep-water well that leaked in November, legal
documents showed, giving a glimpse into expected criminal
charges that could slow the rush to develop Brazil's vast
offshore oil wealth.
The accident cracked geological structures in the reservoir
and oil will continue leaking from the field until it is
emptied, the prosecutor Eduardo Santos de Oliveira told Reuters
in a telephone interview on Monday.
The prosecutor's comments expanded on his investigations and
police reports being used to assemble criminal indictments
against U.S. oil company Chevron, drill-rig operator
Transocean, and 17 of their executives and employees.
The documents, obtained by Reuters, provided the most
detailed look yet at possible causes of the oil leak off
Brazil's southern coast. They also outline why prosecutors are
seeking criminal charges for what industry watchers note is a
relatively small spill at a well that was approved for drilling
by Brazilian regulators.
"We are in uncharted territory," said Cleveland Jones, a
Brazilian oil geologist at the State University of Rio de
Janeiro. "Do we want better environmental standards? Yes. Did
the environment get really hurt? No. If you applied the same
standards to the whole industry, you'd probably have to shut it
down, and we aren't applying the same standards to others."
Authorities on Saturday ordered Chevron's Brazil chief
George Buck and 16 others to surrender their passports and
remain in the country. Criminal charges could be filed by
Wednesday, a spokesman for the prosecutor said. A Brazilian
judge will then determine whether to proceed with formal
indictments.
The pending criminal case, along with a record $11 billion
environmental lawsuit the prosecutor launched against Chevron in
November, show heightened concern over the safety of Brazil's
offshore oil boom in the wake of the 2010 BP oil disaster
in the Gulf of Mexico.
The Chevron leak was less than 0.1 percent of BP's massive
spill and no oil reached shore, raising concern from Chevron and
others that the charges may be politically motivated or unfair.
Much larger and more damaging spills by Brazilian state-run
energy giant Petrobras, which owns 30 percent of the
Frade field operated by Chevron where the leak happened, have
not led to criminal charges against Petrobras or its executives.
Chevron, which says it followed accepted industry practice,
sought and received permission last week to shut down production
at Frade after finding small, unexplained new leaks in the field
that had been producing 61,500 barrels a day. That was down from
about 80,000 bpd before the November spill.
Brazil's oil regulator, ANP, said on Monday it was studying
the new leaks but had found no evidence they were growing in
volume.
The prosecutor, Santos de Oliveira, said the ongoing leaks
provide evidence of irreversible damage.
"There's no way to stop this leak until the reservoir is
depleted," he said on Monday. "The seal was cracked and oil will
leak until it's gone."
Chevron spokesman Kurt Glaubitz said the company responded
to the incident responsibly and dealt transparently with all
authorities.
"The flow of oil from the source was stopped within four
days and the company continues to make significant progress in
containing any residual oil," Glaubitz wrote in an email.
Chevron said on Thursday they have no indication that recent
leaks in the Frade field are related to the November accident.
Natural seeps of oil are common in the Campos Basin, home to
the Frade field, and are one of the reasons that oil was
discovered in the region, Jones said. The basin is the source of
about 80 percent of Brazil's oil.
A Transocean spokesman said the company had no immediate
comment on the documents. On Saturday, the company said it "has
always cooperated with the authorities and will also continue to
vigorously defend its people."
If the charges are filed as expected, the companies and
officials probably face years of legal action. Lawyers have had
travel bans lifted while similar cases were being litigated, and
few individuals or companies have ever been convicted of
environmental crimes in Brazil and fewer have gone to jail.
Reuters reported Jan. 26 that Santos de Oliveira was
preparing charges. The planned indictments were based in part on
an investigation by Fabio Scliar, head of the Brazilian Federal
Police's Environmental Division in Rio.
The well that led to the November leak "should not have been
drilled," the report signed by Scliar says.
When Chevron drilled into an undersea reservoir,
high-pressure oil was able to "kick" and surge into the well.
A safety valve on the sea floor prevented the oil from
shooting up to the Transocean drill rig on the surface, which
would have caused a gusher. Failure at such a valve, known as a
blow-out preventer, or BOP, led to the BP disaster.
The blow-out preventer trapped the kick pressure in the
well, cracking the bare rock of the well bore hundreds of meters
below the seabed. Oil seeped through the breech into porous rock
and cracks then migrated to the sea floor and up to the surface.
This should not have surprised Chevron, Scliar's report
said.
RECKLESS DRILLING OR MISCALCULATION?
Chevron's drilling policies and environmental licensing
documents required it to use a substance known as drilling mud
at pressures sufficient to "overbalance" reservoir pressure
kicks. Mud removes debris upward and holds oil down during
drilling.
In the 18 previous wells drilled in Frade, maximum reservoir
pressure was between 8.4 and 8.6 pounds per gallon, Scliar said,
citing interrogations of Chevron and Transocean officials.
Those wells used mud at pressure of 9.2 pounds per gallon,
giving the company a 0.4 to 0.6 pounds per gallon "mud window,"
or safety margin, the police report alleges.
In the well that leaked in November, Chevron expected
maximum pressure of 9.4 pounds per gallon and used mud with 9.5
pounds per gallon of pressure, the report said.
This provided a mud window or overbalance of only 0.1 pound
per gallon, a safety margin only a quarter to a sixth of those
used in the previous wells, Scliar said in the report.
Scliar alleged that this shows Chevron knew the pressure was
higher than normal, and used mud with less protection.
Chevron used the lower safety margin in the last well
because heavier mud might have exerted enough pressure to crack
the well bore on its own, according to the report. This, Scliar
alleged, shows Chevron was aware of the higher pressure and
weaker-than-normal rock but drilled anyway.
Buck said Nov. 24 that Chevron acted responsibly. The
cracking of the well wall was an unfortunate miscalculation of
reservoir pressure and rock strength, a not-uncommon occurrence
in a business that works in places inaccessible to humans and
beneath thousands of meters of ocean and rock.
Paul Bommer, a petroleum engineering professor at the
University of Texas at Austin, said Chevron faced a "classic
well-design problem."
"Normally what happens when the mud window gets this close
is people will think of stopping and cementing the well to
strengthen it," he said. "This is an area where you have to be
very careful."
Cementing would have reinforced the bare rock of the well
bore against the pressure from the kick and might have prevented
the leak, but it would have cost money and time, Bommer said.
Chevron's environmental licenses say the company is supposed
to store liquids that can close a problem well aboard platforms.
Buck has said it took four days to get mud heavy enough to kill
the well from shore because storms made work dangerous.
Some say Chevron is not the only one to blame for the leak.
Petrobras and Japanese group Frade Japan are minority partners
in the field, and Brazil's government approved drilling plans.
"I wouldn't be surprised if Chevron is found to have done a
bad job," said Ildo Sauer, an oil and gas expert at the
University of São Paulo and Petrobras' former natural gas chief.
"But Chevron got approval for its work at every step. It's a
farce to attack on Chevron and let the government, with its
bigger responsibility, off the hook."