Seacrest Petroleo Bermuda refers to the injunction obtained from a court in Rio de Janeiro, announced on December 27, 2024, preventing Brazilian state-owned oil company Petróleo Brasileiro (Petrobras) from taking action for 30 days in respect of the non-payment by Seacrest Petroleo’s subsidiaries SPE Cricaré and SPE Norte Capixaba of an aggregate of approximately US$71 million of post-closing consideration due to Petrobras on December 31, 2024, for the acquisitions of the Cricaré and Norte Capixaba Clusters.
Seacrest Petroleo said via a stock exchange filing dated January 6, 2025 that SPE Cricaré and SPE Norte Capixaba have filed a Request for Arbitration with the International Court of Arbitration of the International Chamber of Commerce (ICC), thereby commencing an arbitration proceeding against Petrobras.
In the arbitration, the claimants are seeking, among other things:
An order that Petrobras indemnify the claimants for all damages caused to the claimants as a result of Petrobras’ continued failure to successfully complete the repair works on the Terminal Norte Capixaba (TNC) subsea pipelines in accordance with the requirements of the Norte Capixaba purchase and sale agreement, which are essential for the logistics of the offtake of production from the Cricaré and Norte Capixaba Clusters, as well as
The suspension of the enforceability of the post-closing payments due to Petrobras as consideration installments under the Norte Capixaba and Cricaré purchase and sale agreements. Under the Brazilian Civil Code, a party that is in default of its own obligations is not entitled to demand performance of a counterparty’s obligations. For that reason, the claimants did not pay to Petrobras on January 2, 2025, the approximate US$71 million of consideration installments due under the Cricaré and Norte Capixaba purchase and sale agreements.
The basis for the claimant’s Request for Arbitration is the ongoing failure of Petrobras to fulfil its contractual obligations to complete the subsea pipeline repairs at the TNC, which has resulted in US$71.2 million of direct cumulative damages to Seacrest Petroleo to date.
As part of the sale and purchase agreement for the Norte Capixaba Cluster, Petrobras undertook to complete the repairs, but during the 20-month period since the April 2023 closing has repeatedly failed to do so.
The repairs are necessary to allow Seacrest Petroleo to transport heavy oil through the pipelines and realise very light sulphur fuel oil (VLSFO)-spec pricing for its production.
Petrobras’ failure to perform its obligations and restore the pipelines to the temperature and pressure specifications for which they were designed has, during that 20-month period, forced Seacrest Petroleo to sell an off-spec blend of its production at significant discounts to Brent, which has severely impacted the company’s revenue, profitability and reputation.
On April 16, 2024, SPE Norte Capixaba sent an indemnity claim letter to Petrobras in respect of the damages incurred by Seacrest Petroleo as at that date, which totaled US$38.78 million. On December 13, 2024, SPE Norte Capixaba sent Petrobras an updated indemnity claim letter, describing direct cumulative damages that now total US$71.2 million.