Photo: Sete Brasil
By Guillermo Parra-Bernal and Aluísio Alves
SAO PAULO, April 4 (Reuters) – State-controlled Petróleo Brasileiro SA unsuccesfully sought the appointment of arbiters to rework a long-term contract with debt-laden drilling rig leaser Sete Brasil Participações SA, according to three sources with knowledge of the situation.
The proposal, made in recent weeks, called on each party to name three mediators to rework the contract, said the sources, who requested anonymity since the plan is private. The contract between Petrobras and Sete Brasil has been in dispute for two years.
The fate of Sete Brasil, which Petrobras helped create in 2008 to manage the world’s biggest deepwater drilling fleet with $89 billion in orders, hinges on Petrobras’ willingness to sign the contract. Petrobras is Sete Brasil’s sole client and owns 5 percent of the company.
Sete Brasil’s main shareholders shunned the latest proposal and say the company should file for bankruptcy protection to press Petrobras into signing more favorable terms, the sources added.
The arbitration proposal suggests Petrobras wants to thwart Sete Brasil’s threat to file for creditor protection, the sources said. However, no arbitration “could fly at this point” because two separate Sete Brasil shareholders have sued Petrobras over the contract impasse, and they are not willing to drop it, said the first source.
Sete Brasil and Petrobras, both based in Rio de Janeiro, declined to comment.
According to the sources, Petrobras will present a reworked contract proposal in coming weeks.
A collapse of Sete Brasil would be devastating not only for the investors that backed the project but for dozens of local suppliers. More than 800,000 local shipbuilding jobs could be lost, triggering $10 billion in losses at a time when Brazil’s economy is already wrestling with a deep recession, industry estimates show.
The government-backed project began to sour when Petrobras and Sete Brasil became engulfed in a corruption scandal known as “Operation Car Wash,” in 2014. The scandal has deprived Sete Brasil of long-term financing, forcing Brazil’s top banks to roll over 14 billion reais ($3.9 billion) in loans.
A draft proposal that Petrobras presented Sete Brasil in February failed to assure the rig leaser’s survival. Under that proposal, Petrobras would rent 10 rigs for five years, instead of 19 for 15 years originally, and cut lease rates by one-third.
Petrobras Chief Executive Officer Aldemir Bendine and officials at the company’s exploration and production division remain at loggerheads over the issue, with the latter wanting a collapse of the rig leaser, the same sources added.
($1 = 3.5760 Brazilian reais) (Editing by Frances Kerry)
(c) Copyright Thomson Reuters 2016.
Join the gCaptain Club for curated content, insider opinions, and vibrant community discussions.
Join the 109,808 members that receive our newsletter.
Have a news tip? Let us know.
The Bureau of Ocean Energy Management (BOEM) has confirmed competitive interest in two offshore wind areas (WEAs) off the southeast Texas coast, following an unsolicited lease request from Hecate Energy...
W&T Offshore, an independent driller operating in the U.S. Gulf of Mexico, has asked a federal judge to block insurance companies' demands for $250 million in additional collateral for taking apart old oil infrastructure.
Europe is starting to find the limit of a decades-long boom in offshore wind. It can be seen most acutely in the places that have been quickest to build capacity. Countries like Denmark and Sweden are beginning to hit a wall as power prices and incentives drop too low to make building projects worth it. The latest example is a Danish government auction for offshore wind that failed to attract any bids.
Access exclusive insights, engage in vibrant discussions, and gain perspectives from our CEO.
Sign Up
Maritime and offshore news trusted by our 109,808 members delivered daily straight to your inbox.
Essential news coupled with the finest maritime content sourced from across the globe.
Sign Up
Join The Club
