Related moves by Brazil's oil regulator, the ANP, could also lead to a quick restart of output at Chevron's Frade field, the location of the spill, which has been shut since March.

"We could have an agreement before Christmas," Gisele Porto, the prosecutor responsible for the case, said after a public hearing. "The amount is reasonable, and I don't think I could get a judge to sign off on more."

She said Chevron and Brazil's oil regulator, the ANP, suggested that the settlement include 311 million reais worth of damages and additional measures to improve the safety of offshore oil operations.

"It's our understanding that if this settlement is accepted that the civil lawsuits will be extinct," said Rafael Jaen Williamson Chevron's director of corporate affairs in Brazil.

Chevron will pay the entire cost of the settlement, Williamson said. Transocean was found to have no responsibility in the spill by the ANP.

The expected settlement amount is less than 1 percent of the nearly $20 billion in damages initially sought by prosecutors in the case, Brazil's largest-ever environmental prosecution.

"The prosecutor asked for too much and asked for it before investigations of the spill were even complete," said Porto, who took over the case earlier this year.

The proposed settlement represents between six weeks to two months of Chevron's share of output from the Frade field.

Chevron has a 52 percent stake in the Frade field, which was producing 60,000 barrels a day before it was closed on March 15. The heavy crude pumped at Frade trades at a discount to Brent crude, which has averaged $110.33 per barrel since then.

Brazil's state-led Perobras owns 30 percent of output from Frade and Frade Japan, a Japanese group controlled by Sojitz Corp and Inpex Corp, owns 18 percent.

"I'm extremely disappointed," said Eduardo Santos de Oliveira who launched the original lawsuit but handed off the case to Porto and colleagues when it was moved from Campos de Goytacazes to Rio de Janeiro in April.

"I think this sends a message that you can pollute and then escape a conviction by just paying a fine, I don't think that's right," he said in a telephone interview on Friday.

(Reuters, edited by Topco)