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The Brazilian Drilling Contractor Sete Brasil and the Singapore Offshore Platform Builder Sembcorp Marine Fulfilled All Precedent Conditions for an Agreement Regarding Contracts for the Construction of Seven Drilling Vessels to Become Effective, and Sembcorp Marine Is Now in Negotiations with a Buyer for the Completion of Two Drilling Vessels.
Sembcorp Marine said this Thursday (06) that all conditions for the agreement with Sete Brasil have been fulfilled and that they are now in effect. The company will also end its arbitration process against the Sete Group as part of the settlement agreement.
Sembcorp added that it was in discussions with a potential buyer for the completion of two drillships.
The initial agreement with Sete Brasil regarding a total of seven drilling contracts was agreed upon in early October 2019. These contracts had a total price of US$ 5.6 billion. Sembcorp’s compatriot Keppel also reached an agreement with Sete Brasil regarding contracts for the construction of six semi-submersible platforms.
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To put things in context, it is worth noting that Sete Brasil was formed in 2011 to own and operate drilling rigs to be used by Petrobras for offshore drilling in Brazil.
The company was later linked to Brazil’s largest corruption scandal, Lava Jato, which prevented it from obtaining previously approved bank loans intended for payment for rigs.
Additionally, Petrobras refused to commit to the entire package of drilling contracts, which led Sete to default on more than US$ 10 billion in payments for drilling equipment it ordered from Sembcorp and Keppel.
In April 2016, Sete Brasil was forced to seek bankruptcy protection due to Petrobras’s hesitation in signing long-term contracts for the platforms.
Following Sete’s judicial restructuring request, Sembcorp Marine initiated an arbitration process against several subsidiaries of the Brazilian company for claims under the contracts.
Under a final and definitive resolution of the claims, it was agreed that all seven contracts would be terminated and the parties would release each other from all claims related to the contracts.
At the time of the initial contract, Sembcorp Marine stated that the company would retain all work performed on five of the seven drillships.
Regarding two of the seven drillships that had the most advanced construction progress, Sembcorp Marine said in October 2019 that the titles of those works would be shared between the shipyard and Sete, proportionately to the payments made by Sete.
Sete Brasil also identified a buyer for the Sete Brasil companies that own the two drillships. The buyer was expected to negotiate with Sembcorp Marine to enter into new contracts to complete the drillships.
It is also worth noting that two individuals associated with Sembcorp Marine were charged with money laundering and corruption related to a drilling platform construction contract with Sete Brasil earlier this month.
That is, the Federal Public Ministry in Brazil filed charges against Guilherme Esteves de Jesus for money laundering and former employee Martin Cheah Kok Choon for money laundering and corruption in drilling platform construction contracts with Sete Brasil since 2012.
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