Chevron, Transocean Face $10 Billion Fine in Brazil Oil Suit|
Dec. 16, 2011
Published by Minyanville
Authorities in Brazil are to sue oil giants Chevron (CVX) and Transocean (RIG) for more than $10 billion as well as seek a ban on both companies working in the country after around 3,000 barrels of oil were spilled last month off Rio de Janeiro.
Prosecutors attacked the two companies for their “lack of planning and environmental management.” However, the spill is a relatively small one and the quick and tough response to it is thought to be a politically motivated message to other companies hoping to profit from the oil-rich region.
None of the oil reached Brazil’s shoreline or formed a slick and less than a barrel of oil remains on the sea’s surface. State oil company Petrobras (PBR) in fact spilled nearly double the amount of oil last year.
“Unhappily, oil has become political. Every prosecutor wants to get on television, and so we get absurd lawsuits like this,” Adriano Pires, director the Brazilian Infrastructure Center, a Rio de Janeiro-based energy consultancy firm, told the Wall Street Journal. “Nothing is going to happen to Chevron. But what will happen is that it will scare investors; Brazil loses credibility, and the cost of investment goes up.”
There is little evidence as yet of negligence or wrongdoing, according to legal experts. Still, a stark message has been sent to investors which may hamper Brazil’s hopes to push oil output to seven million barrels per day by 2020 -- a target which, if reached, will usurp the United States’ position as the world’s number three oil producer after Russia and Saudi Arabia.
Brazil’s industry is in line for $225 billion worth of investment over the next five years, primarily into developing deepwater subsalt regions off its coast.
Petrobras accounts for 90% of output in the region and government control looks to be taking an ever more aggressive tone. It’s not only the oil industry which is suffering from overly zealous authorities. Mining giant Vale (VALE) saw big changes in management this year, with new chief executive Murilo Ferreira taking over from Roger Agnelli, in the hope of realigning the company’s interests with those of the state.
Vale has also suffered an apparently common problem this month, according to Samantha Pearson, who writes in the Financial Times: “We’ve all been there. You buy something on the cheap made in China or South Korea, but as soon as you get home it breaks.”
Pearson is referring to Vale’s recently leased 400,000 ton iron ore carrier, one of 35 huge ships to cut costs, the brainchild of Agnelli, which is currently taking on water off Brazil’s coast after two ballast tanks cracked on its maiden voyage.
It is the lease of the ship from a Korean company that Vale is highlighting but, continues Pearson, “there is no getting away from the fact that Vale’s name is still plastered in big letters across the sinking hull.”
The long-awaited acquisition of Brazilian airline TAM (TAM) by Latin American airline giant LAN Airlines (LFL) -- which will form the world’s second largest airline -- is one step closer to completion as regulators in Brasilia gave their final approval.
Shareholders are to vote next week and the deal is likely to be completed in the first quarter of 2012. This will put the new operation, with a market value of $11 billion, in second place to Air China (AIRYY.PK) the world’s largest airline.
Those collecting air miles will be eagerly awaiting LAN’s decision on whether to remain part of the Oneworld group or switch to Star Alliance towards the middle of next year.
Popular former President Luiz Inácio Lula da Silva appears to be winning his battle against cancer, with doctors describing his response to treatment “impressive.”
The tumor in Lula’s larynx has shrunk 75%, according to doctors, and the third and final bout of chemotherapy took place this week. The 66-year-old could be back to political life by March if all goes well, reviving expectations that he will run again in 2014 if close ally Rousseff decides to -- or is dissuaded from -- seeking re-election.
Rousseff herself was successfully treated for cancer before she came into power.
Brazilian consumers will finally be able to pick up Apple’s (AAPL) latest iPhone 4S today, two months after its US release. However, there is much criticism of its $1,000-plus cost as well as the lack of a Portuguese version of Siri, the voice-assisted personal assistant which is the phone’s major new asset.