Works of the Arpoador and Guarapari rigs at Estaleiro Jurong closer with new agreement from Sete Brasil

Brazilian drilling contractor Sete Brasil and Singaporean offshore platform builder Sembcorp Marine have fulfilled all conditions precedent to an agreement regarding contracts for the construction of seven drillships to become effective and Sembcorp Marine is now in negotiations with a buyer for the completion of two drillships.

Sembcorp Marine said this Thursday (06th) that all conditions for the agreement with Sete Brasil have been fulfilled and that they are already in force. The company will also terminate its arbitration proceedings against Grupo Sete as part of the liquidation 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 in early October 2019. These contracts had a total price of US$5,6 billion. Sembcorp compatriot Keppel also reached an agreement with Sete Brasil regarding construction contracts for six semi-submersible platforms.

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To put things in context, it is worth remembering that Sete Brasil was formed in 2011 to own and operate drilling rigs to be used by Petrobras in offshore drilling in Brazil.

The company was later linked to Brazil's biggest corruption scandal, Lava Jato, which prevented it from obtaining previously approved bank loans intended to be used for probe payments.

Furthermore, Petrobras refused to commit to the entire package of drilling contracts, which led to Sete not paying installments on more than $10 billion worth of drilling equipment it ordered from Sembcorp and Keppel.

In April 2016, Sete Brasil was forced to file for bankruptcy protection due to Petrobras' hesitation in signing the long-term contracts for the platforms.

Following Sete's request for judicial restructuring, Sembcorp Marine initiated arbitration proceedings against several subsidiaries of the Brazilian company for claims under the terms of the contracts.

Under a final and definitive settlement of claims, it was agreed that all seven contracts would be terminated and the parties would mutually release each other from all claims in relation to the contracts.

At the time of the initial contract, Sembcorp Marine said the company would retain all work carried out on five of the seven drillships.

Regarding two of the seven drillships, which have seen the most advanced construction progress, Sembcorp Marine said in October 2019 that the titles for these works would be apportioned between the yard and Sete, proportionally to the payments made by Sete.

Sete Brasil has 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 remembering that two people linked to Sembcorp Marine were accused of money laundering and corruption related to a drilling rig construction contract with Sete Brasil earlier this month.

Namely, 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 rig construction contracts with Sete Brasil starting in 2012 .