Analysis: Chevron's Amazon-sized gamble on Latin America

Mon Mar 12, 2012 6:24am EDT
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By Joshua Schneyer and Jeb Blount

RIO DE JANEIRO (Reuters) - George Buck, a slim, towering American who runs Chevron's (CVX.N: Quote) operations in Brazil, is often flanked by lawyers these days.

Since November, when the No. 2 U.S. oil company spilled at least 2,400 barrels of oil offshore Brazil, the local attorneys have helped Buck navigate the legal system, sometimes doubling as Portuguese translators and cultural consultants.

The soft-spoken engineer, in the country since 2009, has good reason to measure his words. Chevron is being sued for more than $11 billion by Brazilian prosecutors, although its leak was less than 0.1 percent the size of BP's 2010 Gulf of Mexico oil spill. Officials say they are preparing criminal charges against Chevron, Buck and several of his colleagues.

Eager to halt criticism from regulators, politicians and environmental groups, Buck said last November his company "accepted full responsibility" for the incident. But federal prosecutor Eduardo Santos de Oliveira viewed that as an admission of guilt.

Soon afterward, Oliveira canceled a scheduled interrogation of Buck and filed Brazil's largest-ever environmental lawsuit against Chevron. "We no longer needed to call him in," Oliveira said in an interview earlier this year.

Chevron also faces fines of up to $121 million and has had its drilling license suspended in Brazil, where it has spent over $2 billion developing the largest foreign-run oil field.

The crisis in Brazil adds big new risks for Chevron in what could be a year of reckoning for its Latin American portfolio. It already faces an $18 billion environmental verdict in Ecuador, arising from decades of oil pollution in the Amazon region by Texaco, which Chevron acquired in 2001.

Its footing in Venezuela -- where Chevron stayed after major U.S. oil companies Exxon Mobil (XOM.N: Quote) and ConocoPhillips (COP.N: Quote) departed in 2007 following oil nationalizations -- is also unstable.   Continued...

A Chevron sign is displayed at a gas station in Buckeye, Arizona October 27, 2011. REUTERS/Joshua Lott