Chevron, Transocean say Brazil drops criminal oil spill charges

A Brazilian judge dropped criminal charges against Chevron Corp , Transocean Ltd and 17 of their employees related to a November 2011 offshore oil spill, the companies said on Wednesday.

The criminal case, and a civil suit seeking as much as 40 billion reais ($20.4 billion) in damages, have cast a chill over Brazil's oil industry. The criminal suit carried penalties of up to 31 years. The civil case still open is Brazil's largest-ever environmental lawsuit.

Brazilian oil output fell in 2012, and shutting Chevron operations in the South American country contributed to the decline. Investor interest was already waning in the face of regulatory changes and a bitter dispute over royalties that have blocked the sale of new exploration licenses for four years.

"Chevron has been tied up for more than a year over a spill that caused no real damage," said Adriano Pires, head of the Brazil Infrastructure Institute, a Rio de Janeiro energy think-tank. "It's impossible to understand how a country that wants to attract investment would have taken so long to dismiss the case against Chevron."

Failure to dismiss this case, or resolve the civil suit, will make it hard to attract investment for three oil and gas rights auctions planned for later this year, he added.

The press offices of Chevron and Transocean confirmed a Reuters report of the dismissal of criminal charges based on three sources with direct knowledge of the case.

"We welcome this news that the Court recognized, with respect to the Frade event of November 2011, that Transocean's crews did exactly what they were trained to do, acting responsibly, appropriately and quickly while always maintaining safety as their top priority," Guy Cantwell, a Transocean spokesman in Houston, said in an e-mailed statement.

The criminal charges were filed last March by Eduardo Santos de Oliveira, the same Brazilian prosecutor who filed the civil lawsuit.

The 3,600 barrel spill in the Frade Field northeast of Rio de Janeiro was quickly stopped, cleaned up and caused no discernable environmental damage, Brazil's oil regulator, the ANP, said in a report last year.

The spill was less than 1/1000th of the size of BP Plc's Deepwater Horizon disaster in 2010. The Frade spill never came close to shore. No workers were injured in the Frade spill. In the Deepwater Horizon disaster 11 died.

Chevron said in a statement that it "is pleased by the court's decision. Chevron Brasil remains committed to its policy of full transparency and close cooperation with the Brazilian authorities."

Prosecutors can still appeal the ruling dismissing the charges, made by Judge Marcelo Luzio of the 10th Criminal Unit of the Rio de Janeiro Federal Court, one of the sources told Reuters.

The sources asked not to be named because their employers do not allow them to speak about the case.

The Frade field is 52 percent owned by California-based Chevron, 30 percent by Brazil's state-led Petroleo Brasileiro SA and 18 percent by Frade Jap��o, a group owned by Japanese trading companies Inpex Corp <1605.T> and Sojitz Corp <2768.T>.

Petrobras, as the Brazilian company is known, Sojitz and Inpex were never charged in relation to the spill.

Chevron shares fell 0.82 percent in New York trading late Wednesday afternoon while Transocean shares dropped 2.9 percent.

(Editing by Gerald E. McCormick, Sofina Mirza-Reid and David Gregorio)