Seatrium unit launches arbitration against Petrobras Netherlands

Seatrium subsidiary Jurong Shipyard has initiated arbitration proceedings against Petrobras Netherlands concerning a legacy contract for the P-54 vessel. The group announced on February 10, that the dispute involves a conversion agreement originally signed in June 2004.

The contract relates to the conversion of the P-54 floating production storage and offloading unit. Seatrium noted that the original agreement was amended in 2006 and 2007 to adjust the price due to foreign exchange movements and market overheating conditions.

Following these amendments, the Brazilian Federal Court of Accounts began an audit of the contract in 2007. In 2008, Jurong Shipyard and Petrobras Netherlands signed a settlement agreement to resolve all issues and release past claims, Seatrium said.

Under the terms of that settlement, the Dutch company agreed to pay a close-out sum of $152.3 million. A portion of this total, amounting to $55.7 million, was withheld pending a final decision from the Brazilian court, the company stated.

The court issued its final decision regarding the P-54 contract in November 2023. Seatrium asserted that the basis for withholding the funds is no longer applicable, yet Petrobras Netherlands has continued to retain the payment.

Petróleo Brasileiro Corporation (Petrobras), the parent company of the Dutch entity, issued a demand letter to the shipyard claiming $135.3 million in alleged overpayments. After deducting the withheld amount, the Brazilian corporation requested a net payment of $79.6 million from the subsidiary.

Jurong Shipyard has now commenced arbitration to claim the $55.7 million debt from Petrobras Netherlands. Seatrium stated that the action is intended to, "prevent any further recovery attempts," by the counterparty regarding the P-54 contract.

The proceedings are seated in London under UNCITRAL Rules and governed by English law. Seatrium confirmed that the company has no balance sheet exposure to the withheld funds and has not made a financial provision for the amount.

The group further noted that the final financial impact will depend on the outcome of the legal proceedings.