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History seems to be repeating itself. Once again, Transocean (NYSE: RIG ) is embroiled in an oil-spill mess that threatens to bring repercussions far worse than what the company had to endure after the Gulf of Mexico spill.
The latest crisis
This time, it's a leak of almost 3,000 barrels in eight days in the Campos Basin, off the Brazilian coast, from a well operated by Chevron (NYSE: CVX ) . And Transocean is, yet again, the rig operator. Now, in terms of magnitude, this is much smaller than the Macondo well blowout in the Gulf of Mexico last year, where the spill was about 3,000 barrels of crude oil per day. However, the ramifications for Transocean may be much greater. According to the latest information available, the Brazilian government has already banned the rig maker from operating in the state of Rio de Janeiro and has slapped the company with a $28 million fine.
Keep in mind that the current spill comes at a time when the rig maker has yet to reach a settlement with BP (NYSE: BP ) over the Gulf tragedy. No prizes for guessing that the immediate consequence will be a strengthening of BP's claims for compensation from Transocean in a saga that's yet to rest.
On a positive note, unlike BP, Chevron has accepted full responsibility for the leak by admitting to a miscalculation of the pressures while targeting the concerned reservoir. To a large extent, this should remove the burden of responsibility from Transocean's shoulders. But what really can't be taken for granted is a political backlash leading to a further loss of reputation.
Given that offshore drilling is picking up across the globe as onshore reserves are fast getting depleted, exploration and production companies will be wary of employing the services of Transocean. This is where management needs to carefully weigh its options.
Take the Campos Basin alone: More than 80% of Brazil crude oil is produced here. The recent Tupi oil field discovery, which is three times larger, has yet to figure prominently in terms of production. State-owned Petrobras (NYSE: PBR ) , which is the major operator in both the oil fields, will now think twice before using the services of Transocean. The Gulf of Mexico holds several contracts for the Switzerland-based company as well.
Foolish bottom line
It'll be interesting to see how Transocean reacts to the latest crisis. The best possible way out is to follow Chevron's footsteps and accept full responsibility. Still, that could be far-fetched, given the company's past responses in similar situations.
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