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By Joe Carroll, Juan Pablo Spinetto and Edward Klump – Dec 23, 2011 10:15 AM GMT

Brazil’s threatened indictment of Chevron Corp. (CVX) and Transocean Ltd. (RIG) executives after offshore oil leaks shows that regulators from the North Sea to the Indian Ocean are stepping up scrutiny after BP Plc’s 2010 disaster.

Brazilian authorities have said they may prosecute employees, shut operations and exact more than $10 billion in fines after the leaks at the Frade field 230 miles (370 kilometers) off the coast of Rio de Janeiro. The spill occurred 19 months after an explosion in the Gulf of Mexico killed 11 workers and triggered the biggest offshore U.S. oil spill.

Governments around the world are paying closer attention to how energy explorers drill into high-pressure deposits of crude and natural gas as much as 8 miles beneath the sea surface. Chevron’s Brazil incident took place after a ConocoPhillips (COP) leak in China and prior to what may be Nigeria’s biggest spill in a decade at a Royal Dutch Shell Plc facility.

“There’s been just such a rash of them that governments have got to act tough” with oil companies, Allen Brooks, a managing director at energy-investment bank PPHB LP in Houston and Chevron shareholder, said in a phone interview. Since the BP accident “every spill after that is heightened in terms of media attention and obviously government concern.”

ConocoPhillips was criticized by the People’s Daily, China’s Communist Party newspaper, for “negligence, cover-ups and cheating” in its handling of a June leak in Bohai Bay. Premier Wen Jiabao ordered a “thorough” investigation in September.

In Nigeria, Royal Dutch Shell (RDSA) shut its 200,000 barrel-a-day Bonga field this week after a tanker-loading accident caused less than 40,000 barrels of crude to leak.

Olympic Hosts

Brazilian officials are seeking 20 billion reais ($10.8 billion) in penalties from Chevron for the Nov. 7 leaks that the San Ramon, California-based company has estimated at 3,000 barrels.

The furor in a nation keen to protect beaches from floating globs of crude ahead of the 2014 World Cup and 2016 Olympic Games may lead to new drilling rules so tough that oil exploration becomes unprofitable, said Adriano Pires, an economist and former adviser to Brazil’s state oil ministry.

“What I fear is now we have a circus created around the Chevron problem, a real circus, and to show the people they are doing something they may create norms, legislation and proceedings that make it impracticable to get environmental licenses for offshore exploring,” Pires, head of the Brazilian Center for Infrastructure, a Rio-based energy-industry consultancy, said in a telephone interview.

Making Exploration Expensive

“Depending on the measures that the government may take, it would make oil exploration in Brazil much more expensive,” he said.

Brazil’s federal police have said they intend to indict employees involved in the drilling that led to leaks from sea floor fissures near the $3.6 billion development, Kurt Glaubitz, a spokesman for Chevron, said in a Dec. 21 e-mail. In a separate statement, Transocean, owner of the drilling rig leased for the Frade field, said it will defend the company.

Chevron underestimated the amount of pressure at an oil deposit it was exploring, and crude leaked from the reservoir for about eight days, George Buck, president of Chevron’s Brazilian subsidiary, said on Nov. 20. Buck was among 17 Chevron and Transocean employees targeted for indictments, the Folha de S. Paulo newspaper reported on Dec. 21. Glaubitz declined to identify the employees targeted for indictment.

Foreign Investment ‘Chill’

“I’m a little surprised by the stance that you’re seeing in Brazil, largely because it’s so excessive, potentially, that you could put a very big chill on foreign investment in the deep water,” Ted Harper, who helps manage about $6.8 billion in assets at Frost Investment Advisors in Houston, including about $50 million of Chevron shares, said in a phone interview.

The response so far in Brazil is an “overreaction,” he said.

Chevron has lagged its peers since the leaks were disclosed on Nov. 10. Chevron has gained 0.8 percent since then, compared with increases of 7.1 percent and 4.9 percent, respectively, for Exxon Mobil Corp. (XOM) and Shell, the biggest Western energy companies by market value.

ConocoPhillips, the third-largest U.S. oil company, said on Dec. 21 that it’s taking responsibility for the Bohai Bay spill and is setting up compensation funds to support environmental research and affected communities.

Royal Dutch Shell, Europe’s largest oil company, said yesterday as much as half of the crude that leaked from the Bonga installation has dissipated through natural dispersion and evaporation. Bonga, located 75 miles off Nigeria’s coastline, pumps about 10 percent of the West African nation’s oil.

Worst Since 1998

The leak may have been the country’s worst since a January 1998 spill dumped an estimated 40,000 barrels into the sea from the Idoho platform on the southeastern coast, with slicks reported as far west as Lagos. Shell, the largest foreign oil producer in Nigeria, has been criticized by some local residents and foreign groups for onshore spills.

An “independent verification” of the Bonga platform incident is needed to ensure the spill wasn’t more, Nnimmo Bassey, executive director of Environmental Rights Action, said in a phone interview from Lagos. “Shell has never been forthcoming about incidents of oil spills in the past.”

BP has booked more than $40 billion in losses related to last year’s Gulf disaster that sank Transocean’s Deepwater Horizon rig and spilled an estimated 4.9 million barrels of crude. The London-based oil producer also faces hundreds of lawsuits by fishermen, hoteliers and property owners in coastal areas where crude washed ashore.

More Awareness

Unlike the BP incident in the Gulf, this year’s Brazilian and Chinese spills are within the normal range of oil industry accidents, Nansen Saleri, chief executive officer of Quantum Reservoir Impact LLC in Houston, said in a telephone interview.

“What’s different right now, post-Macondo, is that there’s far more awareness globally at all levels,” he said. In the long run, the industry will develop better and more stringent procedures to help prevent small incidents, he said, and oil and gas development will continue.

“Those countries who choose to go on a very punitive path at the end will suffer the negative consequences themselves,” said Saleri, who is a former reservoir-management chief at Saudi Arabia’s state oil company.

To contact the reporters on this story: Joe Carroll in Chicago at jcarroll8@bloomberg.net; Juan Pablo Spinetto in Rio de Janeiro at jspinetto@bloomberg.net; Edward Klump in Houston at eklump@bloomberg.net

To contact the editors responsible for this story: Tina Davis at tinadavis@bloomberg.net; Dale Crofts at dcrofts@bloomberg.net

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December 22, 2011, 11:33 AM EST

By Joe Carroll and Juan Pablo Spinetto

Dec. 22 (Bloomberg) — Chevron Corp., the operator of the Brazilian offshore well that triggered oil leaks, and rig owner Transocean Ltd. will defend executives threatened with criminal indictments in the South American nation.

Chevron learned that Brazil’s federal police intend to indict employees involved in the drilling that led to the Nov. 7 leaks from seafloor fissures near the $3.6 billion Frade development, Kurt Glaubitz, a spokesman for the San Ramon, California-based company, said in a statement late yesterday. Transocean, in a separate statement late yesterday, said it will “vigorously defend the company and its collaborators.”

Chevron, the second-largest U.S. energy company by market value, has been fined 50 million reais ($26.9 million) and ordered to halt all drilling and crude production off Brazil’s coast after discovering the leaks last month. Chevron estimated the volume of the seeps at 3,000 barrels during the eight days it took for the company to locate and halt the leaks.

Chevron and other offshore oil explorers are facing increased scrutiny of their drilling practices in the wake of BP Plc’s 2010 blowout of a well in the Gulf of Mexico that killed 11 workers and led to the worst U.S. offshore crude spill.

In Brazil, the concerns have been compounded as the coastal city Rio de Janeiro prepares to host the 2014 World Cup and the Olympic Games two years later. Chevron’s Frade oil field is about 230 miles (370 kilometers) northeast of Rio in a region of the Atlantic Ocean known as the Campos Basin.

Employees Indicted

Chevron underestimated the amount of pressure at an oil deposit it was exploring, and crude leaked from the reservoir for about eight days, George Buck, president of Chevron’s Brazilian subsidiary, said on Nov. 20. Buck was among 17 Chevron and Transocean employees targeted for indictments, the Folha de S. Paulo newspaper reported yesterday. Glaubitz declined to identify the employees targeted for indictment. George wasn’t available to comment, the spokesman said.

Anthony Dovkants, a spokesman for Vernier, Switzerland- based Transocean, said in an e-mailed statement that the allegations were without merit.

Chevron rose 47 cents to $105.90 at 10:30 a.m. in New York trading. Transocean rose 1.3 percent to $40.39.

BP has booked more than $40 billion in losses related to last year’s Gulf disaster that sank Transocean’s Deepwater Horizon rig and spilled an estimated 4.9 million barrels of crude. The London-based oil producer also faces hundreds of lawsuits by fishermen, hoteliers and property owners in coastal areas where crude washed ashore.

Other Oil Spills

ConocoPhillips, the third-largest U.S. oil company, said yesterday it’s taking responsibility for two oil spills in China’s Bohai Bay in June and is setting up compensation funds to support environmental research and affected communities.

Royal Dutch Shell Plc, Europe’s largest oil company, shut its 200,000 barrel-a-day Bonga field off Nigeria after a leak during a tanker loading caused what may be the country’s worst offshore spill in more than a decade. The Bonga deep-water discovery produces almost 10 percent of Nigeria’s crude.

Exxon Mobil Corp. of Irving, Texas, is the biggest U.S. energy company by market value.

–Editors: Jasmina Kelemen, Tina Davis

To contact the reporters on this story: Joe Carroll in Chicago at jcarroll8@bloomberg.net; Juan Pablo Spinetto in Rio de Janeiro at jspinetto@bloomberg.net

To contact the editor responsible for this story: Tina Davis at tinadavis@bloomberg.net

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December 21, 2011, 5:39 AM EST

By Eduard Gismatullin

Dec. 21 (Bloomberg) — Royal Dutch Shell Plc, Europe’s largest oil company, shut its 200,000 barrel-a-day Bonga field off Nigeria after oil leaked during a tanker loading.

An export line from the field’s floating production, storage and offloading vessel was the likely cause of the leak, estimated at less than 40,000 barrels of crude, Shell said in a statement today. The oil flow has been halted.

“We are sorry this leak has happened,” Mutiu Sunmonu, the company’s Nigerian chairman, said in the statement. “It is important to stress that this was not a well-control incident of any sort, and to make clear that no-one has been injured.”

Shell, the largest foreign oil producer in Nigeria, has been operating in the African nation since 1937 and has been criticized by the local population and international institutions for numerous spills in the country at its onshore fields. Bonga, Nigeria’s first deepwater discovery, lies 120 kilometers (75 miles) off the coast and produces almost 10 percent of the country’s crude.

Shell planned to export five cargoes of 1 million barrels each of Bonga crude every month from December to February, according to loading programs obtained by Bloomberg News.

Shell’s shares pared gains in London trading and were up 0.8 percent at 2,296.5 pence at 8:45 a.m. local time.

The company yesterday said a drilling operation will stop for weeks in the Gulf of Mexico after spilling 319 barrels of drilling fluid.

–With assistance from Sherry Su in London. Editors: Will Kennedy, Stephen Cunningham

To contact the reporter on this story: Eduard Gismatullin in London at egismatullin@bloomberg.net

To contact the editor responsible for this story: Will Kennedy at wkennedy3@bloomberg.net

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By Eduard Gismatullin – Dec 20, 2011 3:23 PM GMT

Royal Dutch Shell Plc (RDSA), Europe’s largest oil company, said a rig will stay shut for weeks after spilling 319 barrels of drilling fluid into the Gulf of Mexico.

The company suspended work at the Appomattox discovery, which leaked synthetic and biodegradable drilling mud from a booster line, Shell said. The leak was isolated, stopped and remedial action has been approved by the regulator, it said. The company temporarily abandoned the well.

Drilling will resume when Shell and relevant government agencies “are confident that the necessary repairs have been made and the operations can continue safely, which is likely to be in a matter of weeks,” Jonathan French, a London-based spokesman at the company, said in an emailed statement.

The Anglo-Dutch company was drilling the development well following approval from the U.S. government of its two exploration plans in May, the first since BP Plc’s spill in the Gulf of Mexico in 2010. Shell holds 80 percent of the Appomattox prospect with Nexen Inc. (NXY) of Canada holding the rest.

Shell and Nexen announced the discovery in the deepwater eastern part of the Gulf in March 2010. The partners have partly appraised the field and estimate that it holds more than 250 million barrels of resources, according to Nexen estimates.

To contact the reporter on this story: Eduard Gismatullin in London at egismatullin@bloomberg.net

To contact the editor responsible for this story: Will Kennedy at wkennedy3@bloomberg.net

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December 16, 2011, 5:06 PM EST

By Jim Snyder

Dec. 16 (Bloomberg) — Royal Dutch Shell Plc won conditional U.S. approval for a plan to drill as many as six exploration wells in Alaska’s Chukchi Sea next year, the Bureau of Ocean Energy Management said.

Final approval requires Shell to meet safety and environmental-protection measures, according to an e-mailed statement today from the Interior Department bureau. Shell will have to stop drilling 38 days before ice appears in the Arctic, to avoid an end-of-the season spill when cleanup is difficult, the agency said. The U.S. projects ice will form by Nov. 1.

“We will continue to work closely with agencies across the federal government to ensure that Shell complies with the conditions we have imposed on its exploration plan,” Tommy Beaudreau, bureau director, said in the statement.

Shell, which has invested about $4 billion in the Arctic leases since 2005, hasn’t drilled any wells in the region while opponents won delays with appeals and lawsuits. Environmental organizations and Alaskan native groups have said it would take too long for equipment to reach the remote and icy region during an oil spill.

Shell acquired its leases to the Chukchi Sea in 2008.

The Interior Department’s Bureau of Safety and Environmental Enforcement must approve Shell’s oil-spill response plan before drilling can start, according to the statement.

The company needs permits from the Environmental Protection Agency, the U.S. Fish and Wildlife Service and the National Marine Fisheries Service, according to the statement.

–With assistance from Katarzyna Klimasinska in Washington. Editors: Steve Geimann, Larry Liebert

To contact the reporter on this story: Jim Snyder in Washington at jsnyder24@bloomberg.net

To contact the editor responsible for this story: Larry Liebert at lliebert@bloomberg.net

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December 16, 2011, 3:11 PM EST

By Paul Burkhardt

Dec. 16 (Bloomberg) — Gulf Coast gasoline rose for a fifth straight session as Royal Dutch Shell Plc and Delek US Holdings Inc. reported refinery problems in Texas and Louisiana.

Shell reported an “operations upset” at the Norco, Louisiana, refinery when furnaces were swapped yesterday, according to a filing with the National Response Center. Delek had emissions at its Tyler, Texas, plant, according to a filing with state regulators.

Conventional, 87-octane gasoline’s discount on the Gulf Coast narrowed 0.50 cent to 3.75 cents a gallon versus futures on the New York Mercantile Exchange at 2:41 p.m., according to data compiled by Bloomberg. It’s the highest level since Nov. 9. Prompt delivery rose 0.93 cents to $2.4545 a gallon.

Sunoco Inc. shut a hydrotreater at its Philadelphia refinery for maintenance, according to a person familiar with operations at the plant. The work on Unit 859, a distillate hydrotreater, is unplanned, said the person, who declined to be identified because the person is not authorized to speak for the refinery.

The premium for ultra-low-sulfur diesel in New York Harbor slipped 0.12 cent to 2.88 cents a gallon versus heating oil futures traded on the New York Mercantile Exchange at 1:56 p.m. The differential rose 1 cent a gallon yesterday.

–With assistance from Paul Gordon in Hong Kong. Editors: Margot Habiby, Charlotte Porter

To contact the reporter on this story: Paul Burkhardt in New York at pburkhardt@bloomberg.net.

To contact the editor responsible for this story: Dan Stets at dstets@bloomberg.net.

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By Paul Burkhardt

Dec. 16, 2011 (Bloomberg) — Royal Dutch Shell Plc plans to seek binding commitments to transport oil on its proposed Westward Ho pipeline after receiving enough interest from shippers, the company said in a statement.

Shell plans to conduct an open season for commitments in early 2012 to ship on the 30-inch line that would run from St. James, Louisiana, to the Port Neches/Nederland, Texas, area, the company said.

The Westward Ho line, which would ship around 600,000 barrels a day, may be completed and commissioned by early 2015, according to Shell.

–Editors: David Marino, Charlotte Porter

To contact the reporter on this story: Paul Burkhardt in New York at pburkhardt@bloomberg.net.

To contact the editor responsible for this story: Dan Stets at dstets@bloomberg.net.

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The Associated Press December 15, 2011, 5:46PM ET

By DAN JOLING

ANCHORAGE, Alaska

Pollution emitted from drilling ships and support vessels in Arctic waters would be regulated by the Interior Department instead of the Environmental Protection Agency under language inserted into a spending bill by U.S. Sen. Lisa Murkowski.

The Alaska Republican announced the move Thursday and said it will address systemic problems in the EPA permitting process for offshore oil and natural gas exploration.

A subsidiary of Royal Dutch Shell hopes to drill exploratory wells in the Chukchi and Beaufort seas next summer on leases purchased in 2008. Shell’s drilling has been thwarted so far by challenges that include appeals of air permits granted by the EPA.

Murkowski said in her announcement that the language inserted into the spending bill is one of the most important steps Congress can take to ensure that responsible development is allowed to go forward in the Beaufort and Chukchi seas. Shell, Murkowski said, has invested $4 billion in preparing for Arctic exploratory drilling and has waited more than five years for valid EPA operating permits.

The Interior Department, she said, processes air permits within months.

“Transferring air quality authority from the EPA to Interior could place Alaska’s Arctic leases on a level playing field with the Gulf of Mexico and provide a level of predictability — without compromising environmental protections — for those companies willing to invest in the production of America’s energy,” she said in a prepared statement.

A Murkowski spokesman said the language was not intended only to help Shell but also other companies that want to drill on Alaska’s outer continental shelf.

“The EPA process is broken, is Sen. Murkowski’s point,” Robert Dillon told The Associated Press by phone from Washington, D.C.

Colin O’Brien, an attorney for environmental law firm Earthjustice, which is representing Alaska Native and conservation groups in an appeal of Shell’s latest EPA air permit, said there have been other attempts to limit the agency but not to shift its authority wholesale to the Interior Department.

“This is a brazen giveaway to Big Oil that ignores the impact of Arctic oil and gas activities to the detriment of nearby communities and the environment,” he said from Juneau.

Interior’s regulations do not address air pollution at the source and excludes support vessels that may account for 96 percent of an operation’s emissions, he said.

“From start to finish, there’s less analysis, less control, and Clean Air Act protections are almost completely eviscerated,” he said.

Rebecca Noblin, an attorney for the Center for Biological Diversity in Anchorage, said by e-mail that Murkowski’s tactic will significantly decrease oversight of air emissions.

“The fact is, Senator Murkowski is upset that the EPA actually requires Shell to comply with the Clean Air Act,” Noblin said. “What she dubs `streamlining’ is no more than an attempt to put air permitting in the hands of a department known for rubber stamping dangerous drilling projects. Our senator would rather pollute Alaska’s air and threaten our health than say no to the oil companies.”

The issue for Shell is not the process, she said, but following the law.

“If they just complied with the Clean Air Act, they would get their Clean Air Act permits,” she said.

Shell Alaska spokesman Curtis Smith said the company has worked closely with the EPA on its air permits and believes they will be validated by the appeals board. He accused organizations such as Noblin’s of leaning on hyperbole and misstatements to make a case against Arctic drilling.

“Not only do Shell’s proposed air emissions meet the Arctic standard, we are setting the bar,” he said in a statement. “Shell has committed hundreds-of-millions of dollars to modifying exhaust systems on both drill ships and committed to use ultra-low sulfur fuel on our support vessels. We stand by the EPA’s expert conclusion that our operations will not adversely impact the local air shed or local stakeholders.”

Dillon said the oversight change language is in both an omnibus spending bill and stand-alone House appropriations bill and still must be approved by the Senate.

The other two members of the Alaska congressional delegation issued statements lauding the proposed change.

“This is a game changer for development in the Arctic,” said Rep. Don Young. He said he had worked with colleagues on the same issue.

“After over five years of waiting on air permits and seeing billions of dollars spent while waiting on permits, I am as confident as ever that we will finally see production taking place in both the Beaufort and Chukchi seas.”

Sen. Mark Begich, D-Alaska, said he had pushed for the change with the White House and the Senate Democratic leadership.

“This is an issue of fairness and is long-overdue,” Begich said. “Companies with projects in the Arctic are at a competitive disadvantage under the EPA. It’s time to move all air permitting under the Interior Department.”

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December 16, 2011, 2:21 AM EST

By James Paton

Dec. 16 (Bloomberg) — Arrow Energy Ltd., the natural gas producer owned by Royal Dutch Shell Plc and PetroChina Co., won approval from Australia’s Foreign Investment Review Board to buy Bow Energy Ltd. for A$535 million ($534 million).

The transaction was also cleared by Chinese authorities, Brisbane-based Bow said today in a statement. The decisions follow approval earlier this month by the Australian Competition & Consumer Commission.

Arrow, seeking additional resources for a liquefied natural gas venture in Queensland state, agreed in September to increase its takeover offer to A$1.52 a share in cash from A$1.48. The accord was 72 percent more than Bow’s price of 88.5 cents in Sydney before Arrow made its initial offer Aug. 22.

Brisbane-based Bow was valued at between A$1.14 and A$1.53 a share by independent analyst Grant Samuel, the company said Nov. 17. Samuel found the deal “highly attractive,” given the uncertain economic and market conditions, the premium given to shareholders and the “remote prospect of Bow shares trading above A$1.52 per share in the foreseeable future,” Bow said.

Arrow, also based in Brisbane, plans the fourth LNG venture in Queensland to meet rising Asian demand, following approvals for more than $50 billion in developments led by BG Group Plc, Santos Ltd. and ConocoPhillips. The acquisition may allow Arrow to expand output at the venture’s first two units by as much as 15 percent, it said in September.

Bow expects the transaction to be completed Jan. 11, it said last month.

–Editor: Keith Gosman,

To contact the reporter on this story: James Paton in Sydney at jpaton4@bloomberg.net

To contact the editor responsible for this story: Andrew Hobbs at ahobbs4@bloomberg.net

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By Arnaldo Galvao and Lucia Kassai – Dec 15, 2011 4:38 PM GMT

Royal Dutch Shell Plc (RDSA) and Cosan Industria & Comercio SA’s joint venture in Brazil has reached a preliminary accord to sell its jet-fuel unit to BP Plc, the nation’s antitrust regulator said today.

The venture, called Raizen, was granted an additional five days to present the agreement to the regulator before being fined, Olavo Chinaglia, interim president of the agency, said at a meeting in Brasilia today. Cade, as the regulator is known, ordered the sale after Shell and Cosan combined some assets in Brazil, including service stations and the jet-fuel unit that Cosan had bought from Exxon Mobil Corp. (XOM)

“Failure to carry out Cade’s decision means the operation will have to be reverted with a return of assets to Cosan,” said Chinaglia. “This would affects the assessment of the joint venture formed between Shell and Cosan.”

A final ruling on the entire joint venture hasn’t been scheduled yet, Cade’s attorney Gilvandro Araujo said. Raizen is the world’s biggest processor of sugar-cane into sweetener and ethanol.

To contact the reporters on this story: Arnaldo Galvao in Brasilia Newsroom at agalvao1@bloomberg.net; Lucia Kassai in Sao Paulo at lkassai@bloomberg.net

To contact the editor responsible for this story: Carlos Caminada at ccaminada1@bloomberg.net

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