Seatrium has initiated international arbitration proceedings through its subsidiary Jurong Shipyard against Petrobras Netherlands B.V., specifically to the FPSO P-54 conversion contract signed in 2004 and subsequently amended to reflect exchange rate variations and market conditions.
The activation of the arbitration procedure by the FPSO P-54
The focus of the dispute is the withholding of US$55.7 million corresponding to a settlement agreement signed in 2008. That agreement established a total payment of US$152.3 million to close all claims arising from the offshore contract. In addition, some part of the amount was conditioned to the final decision of the Brazilian Court of Auditors.
The audit initiated by the Tribunal de Contas da União in 2007 reviewed the contractual amendments linked to the P-54 project. After years of review, the agency issued its final decision in November 2023. According to Seatrium’s position, the basis justifying the retention ceased to exist with that ruling.
However, Petrobras is withholding the amount. Also, the parent company Petróleo Brasileiro S.A. filed a claim for alleged overpayments amounting to US$135.3 million. After deducting the amount withheld, the net claim amounts to US$79.6 million.
The P-54 contract provides for any dispute to be settled by arbitration based in London under the UNCITRAL rules and under English law. Under this framework, Jurong Shipyard seeks to recover the amount withheld and block any further compensation attempts related to the contract.
From a legal point of view, the case combines English contract law with an international arbitration process. This element introduces a relevant dimension for the offshore sector and for future FPSO conversion contracts. FPSO conversion contracts.
The company has indicated that there is no balance sheet exposure in respect of the US$55.7 million and that no provision has been made. The proceeding is at a preliminary stage, so the financial impact will depend on the final award.
Finally, Seatrium, as a global provider of engineering solutions for marine and offshore energy, maintains a presence in Asia, the Americas, Europe and the Middle East. And with its expertise in construction, conversion and repair of floating assets, it is positioned as a reference in complex projects such as the FPSO P-54.
Source and photo: Seatrium