Chevron Reports Oil Leak Off Brazil Coast, Suspends Production

Chevron Corp., the second-largest U.S.-based oil company, experienced a setback as it hoped to restart offshore oil drilling in Brazilian waters after a November oil spill that led to an $11 billion lawsuit by Brazilian prosecutors, Reuters reported.

The company announced Thursday that the drilling operation, a partnership with Petrobras, the Brazilian state oil company, and Frade Japan, which is controlled by Japan's Inpex, asked Brazilian regulators to authorize it to suspend its own oil production in the Frade Field, which is located off the coast of Rio de Janeiro.

The temporary shut-down request was triggered by a new crude oil leak detected on the ocean floor, according the ANP, Brazil's state oil regulator, and the company itself. Reuters reported that the oil leak is in the same area as a November spill for which Chevron and Transocean, its rig operator, are currently being sued for $11 billion by Brazilian prosecutors, Reuters reported.

In November, an appraisal well in the same area experienced a surge in pressure that cracked the ocean floor in numerous places.

The cracks allowed 2,400-3,000 barrels of oil to escape into the ocean. Chevron, based in San Ramon, Calif., was fined $28 million and faces additional fines of up to $121 million, and it has had its Brazilian drilling license suspended following the accident.

The new oil seep in the ocean floor suggests the area remains fragile following November's incident.

The company will conduct a comprehensive technical study and prepare a complementary study to better understand the geological features of the area, working with our partners and seeking necessary approvals from [Brazil's] National Petroleum Agency, according to a company statement.

Chevron shares closed down 66 cents at $110.01 on Thursday.