Sete Brasil seeks US$6bn in compensation from Petrobras

Sete Brasil Participações has filed a lawsuit against Brazil’s federal oil company Petrobras seeking 36bn reais (US$6bn) in compensation for the collapse of a drilling rigs project.

Dubbed Projeto Sondas, the project was launched in 2009 to support exploration and production in Brazil’s pre-salt offshore fields. Following the discovery of massive oil fields in the area, Petrobras estimated it needed at least 40 drilling rigs, with 28 to be built by Brazilian shipyards to comply with local content requirements of oil and gas watchdog ANP.

Petrobras was expected to charter the locally built rigs under long-term contracts with an estimated budget of US$22bn.

Sete Brasil was created to carry out the project, with Petrobras as its principal shareholder. To accelerate construction, Petrobras coordinated raising funds from other Sete Brasil shareholders and helped secure bridge loans from financial institutions, which would be repaid using long-term financing from development bank BNDES.

The project unraveled in 2015 when the federal police launched Lava Jato, an anti-graft operation which exposed widespread corruption at Petrobras, prompting BNDES to freeze financing. Lacking the funds to repay loans or shipyard contractors, Sete Brasil filed for bankruptcy protection in 2016, a process that is still ongoing.

Sete Brasil alleges that Petrobras “took advantage of the Lava Jato probe to conceal its intention to dismantle Projeto Sondas or, at the very least, reduce it to an insignificant scale, without taking responsibility for the damage this would cause to all those involved in the project.”

The company claims Petrobras decided to abandon contracts because would it be more profitable to lease rigs on the international market rather than honor its long-term charter agreements.

Sete Brasil said investors had contributed 8bn reais in equity and 19bn reais in bridge loans, which were expected to be repaid once BNDES funds were released.

The compensation claim is based on Petrobras’ alleged failure to meet contractual obligations, particularly regarding the chartering of rigs, as well as wrongdoing by its representatives during project execution, according to Sete Brasil.

“There was a criminal group formed by Petrobras executives, some of whom became Sete Brasil executives solely because, in 2010, as the company’s de facto controlling shareholder, Petrobras appointed them to its board,” the company alleges.

The suit is handled by law firms Bermudes Advogados and Faveret Tepedino Londres Fraga.

Requesting anonymity, a lawyer said it is too early to predict an outcome because the case is still in its first phase and Petrobras has not yet presented its defense.

"There is no guiding element to predict the outcome of a dispute worth billions, and beyond that, there is a political aspect due to Petrobras’ involvement," the attorney told BNamericas.

But the lawyer believes Sete Brasil does have a chance of success. 

"The evidentiary phase will also play a very significant role in the outcome of the case."

João Gabriel Águila, from the Aguila Advogados law firm, highlighted that past arbitration proceedings involving FIP Sondas, which holds a 95% stake in Sete Brasil, including Petrobras' stake, have had mixed outcomes. 

“On the other hand, in proceedings against BTG Pactual, Petros, and Previ [funds that make up FIP Sondas], the company chose to reach settlement agreements as a preventive measure to avoid litigation,” he told BNamericas.

In 2018, Petrobras’ board approved the key terms for a possible out of court settlement with Sete Brasil.

The terms included maintaining charter and operating contracts for four rigs for 10 years, at a daily rate of US$299,000. The contracts for the other 24 units that Petrobras initially hired would be terminated.

The terms also included ending the participation of Petrobras and its subsidiaries in Sete Brasil and FIP Sondas, an investment fund which accounts for most of the rig builder's shareholders.

At the time, Petrobras said that the signing of the agreement was contingent on Sete Brasil securing an experienced deepwater drilling operator to implement the contracts.

Petrobras declined to comment on the lawsuit when contacted by BNamericas.