Petrobras Trying To Ditch Further Offshore Drilling Contracts

Published at 01:59PM - 08/10/15

Deeply troubled Brazilian state run offshore oil and gas company, Petrobras, is looking to walkout of yet more legally binding contacts with offshore contractors.

Over the last couple of months, Petrobras has torn up contracts from offshore drilling firms including, Vantage Drilling and Paragon Offshore Drilling.

Offshore supply boat companies haven’t been exempt, with the likes of World Wide Supply AS, Siem Offshore and Ultrapetrol Supply Vessels also loosing millions.

So far conservative estimates put the backlog Petrobras has simply walked away from at over US$600 million, with some estimates approaching the US$1 billion mark.

Petrobras Legal Issues

Petrobras’ standard way to end contracts it has no interest in, is to issue offshore contractors with ‘breech of contract’ notices.

The latest company to find itself at the brunt of Petrobras, is offshore drilling contractors, Ocean Rig.

In a fleet status report, released today, Ocean Rig revealed that they too have received a notice of ‘material breach’ from Petrobras, for the contract on the Ocean Rig Mylos, deepwater offshore drill ship.

If correct, the breech entitles Petrobras to termite the contract if the breech is not remedied within 75 days. Yet like all other offshore companies issued with similar notices- the actual brach is not stated.

A statement release by Ocean Rig said: ‘We believe that such notice is totally without merit and we intend to vigorously defend our rights under the contract.’

Petrobras Troubles

Petrobras is a company that is in deep trouble, both legally and financially. A large percentage of the board has been indicted in long running corruption, with some former board members already sentenced to long prison terms.

Petrobras’ former head of corporate services, Renato Duque, was recently sentenced to over 20 years on corruption charges, after courts proved he had received bribes and kickbacks for Petrobras contracts amounting to over US$9 million.

Financially, Petrobras cannot close down infrastructure and tear up contracts quick enough. 

Brazil too is facing much the same predicament as Petrobras.  It too is facing severe financial troubles, and it too has a host of high ranking government officials facing much the same fate as the Petrobras board.

Only yesterday, the South American nation announced that it had its worst offshore oil and gas licensing round for over a decade, with only 37 of the 266 licences sold.