Chevron, Transocean Slapped With $11B Suit After Brazil Spill

Brazilian authorities are suing Chevron (NYSE:CVX) and Transocean (NYSE:RIG) for $11 billion and asked the energy companies to suspend activities in the country in the wake of an oil spill last month.

The news pushed Chevron’s stock to session lows. The stock was recently off 3.38% to $100.10.

The fines and request to suspend activities come after an undersea leak at the Frade Field on November 7 that was operated by Chevron, the No. 2 U.S. energy company. The spill spewed 3,000 barrels of oil in the deep Atlantic off the northeast coast of the country.

The investigation found that Chevron and Transocean “were not able to control the damage caused by the spill, which highlights the lack of environmental planning and management of companies,” the prosecutor’s office in Campos, Rio de Janiero state said in a statement.

The lawsuit alleges environmental damage and the prosecutor also requested an injunction to stop the companies’ operations in Brazil under the penalty of a daily fine of $500 million.

However, San Ramon, Calif.-based Chevron said it hasn't received formal notice from the Brazilian prosecutor nor has it received instructions from regulators to suspend operations.

"From the outset, Chevron responded responsibly to the incident at its Frade Field and has dealt transparently with all Brazilian 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," Chevron said in a statement. "Chevron has also continued to address the surface sheen, which is now less than a single barrel. There have been no coastal or wildlife impacts."

Regulators in a number of countries have reacted more aggressively to oil spills as the memory of the gigantic BP (NYSE:BP) oil spill in the Gulf of Mexico last year looms large. That disaster, which also involved Transocean, spewed an estimated 4.9 million barrels of oil into the Gulf.