Mainboard-listed Seatrium has commenced arbitration proceedings against Petrobras to finalise disputed payment claims over the P-54 FPSO conversion project contract. The Edge Singapore understands that the arbitration is not expected to impact Seatrium’s current relationship with Petrobras as it is a legacy contract from more than two decades ago.
Specifically, Seatrium’s subsidiary Jurong Shipyard Pte Ltd (JSPL) is seeking withheld payment of US$55.7 million from Petrobras’ subsidiary Petrobras Netherlands B.V (PNBV). In addition, Petrobras is claiming an additional US$79.6 million from JSPL. This sum is derived from alleged P-54 contract overpayment of US$135.3 million less the withheld amount. Seatrium also seeks to prevent any further recovery attempts by Petrobras in connection with the P-54 contract through the arbitration.
JSPL and PNBV entered into the P-54 contract in June 2004. Due to cost increases arising from foreign exchange movements and market overheating conditions, contract amendments were made in 2006 and 2007 to adjust the contract price. The Brazilian Federal Court of Accounts, the Tribunal de Contas da União (TCU), commenced an audit process in relation to the P-54 contract and the amendments thereto.
In 2008, JSPL and PNBV came to an agreement to fully resolve all issues under the P-54 contract and to mutually release each other from all past claims arising under the contract. As part of the agreement, PNBV agreed to pay JSPL a close-out sum of US$152.3 million with US$55.7 million of this amount withheld pending TCU’s final decision. JSPL expressly reserved its right to claim the withheld amount through arbitration under the agreement.
The TCU issued its final decision relating to the P-54 contract in November 2023 and Seatrium says that the grounds to withhold the US$55.7 million is "no longer applicable". As such, it has commenced the aforementioned arbitration proceedings.
In a statement, Seatrium says that the P-54 contract provides for London-seated arbitration under the United Nations Commission on International Trade Law Arbitration Rules and is governed by English law.
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The company says that it has no balance sheet exposure to the US$55.7 million. It has also not made provision for both the withheld amount and the US$79.6 million claimed by Petrobras. The company is also unable to definitively ascertain the financial impact that could potentially arise from the proceedings, but adds that no financial impact is expected at this juncture.
Shares in Seatrium closed at $2.09 on Feb 9, up three cents or 1.5% from the previous trading day.
