Marítima-Petrobras clash worsens as P-40 arrives in Brazil

The long running love-hate relationship between Brazilian state oil company Petrobras and local construction and oil services company Marítima has once more broken out into a war of words and seems to be again headed for the courts.

Relations between the two companies have been frosty since Henri Phillipe Reichstul became President of Petrobras in early 1999. The event that sparked the latest row was the arrival from the Jarong shipyard in Singapore of the giant production platform known as P-40 on January 14—more than a year after the delivery date set in the contract between the companies.

Petrobras greeted the arrival of the platform by publicly criticizing Marítima to journalists. At a press conference, company Services Director Antônio Menezes claimed that over-budget costs for P-40, and similar cost over-runs for the P-38 platform, (which should arrive in Brazil at the end of the month), were costing Petrobras some US$212 million. He also said that Marítima had caused serious delays to the start up of production in the Marlim Sul Field, located in the prolific Campos Basin. The two platforms with a total cost to Petrobras of some $752 million are destined for drilling in 850 to 2,400 meters of water. The P-40 is intended to produce up to 150,000 b/d of heavy Marlim crude and 6 million cubic meters per day of natural gas by November 2002, while P-38 is a floating storage and off-loading (FSO) platform.

Petrobras President Reichstul said that Marítima has "systematically" delayed the delivery of platforms and other production equipment and gone over agreed budgets. "This is without counting the cost in terms of delayed oil production, which translated into present values, represent enormous costs." Reichstul was referring to the P-36, P-37, and P-38 platforms, all of which, like P-40, have suffered delays in completion and delivery.

Several days later, Marítima responded by calling its own press conference to respond to the accusations, and announced that it is introducing a law suit against Petrobras for $2 billion dollars for losses and "moral and material" damages caused by the state company. At the press conference, Marítima President German Efromovich showed a thick wad of documentation which he said was the result of Petrobras having requested no fewer than 96 modifications to the specifications of the platform during its construction.

"It is they that owe us money because of these modifications, which were not in the original budget," claimed Efromovich. Marítima said that Petrobras requested a total of 321 modifications to the four platforms, which resulted in extra costs of $422.5 million. Of this, Petrobras has paid around $300 directly to suppliers, leaving it owing a further $100 million to Marítima.

Marítima is also suing Petrobras for the "unexplained" cancellation of six drilling rigs, worth around $200 million each.

Relations between Petrobras and Marítima have been volatile ever since reforming technocrat and banker Henri-Phillipe Reichstul took over the state-owned giant in March 1999. Reichstul has taken a hard line on contractors that have not fulfilled the terms of their contracts, in spite of a powerful lobby in Brasilia in favor of Marítima and other "national suppliers" of equipment for Brazil's oil industry. Several contracts granted by Reichstul's predecessor Joel Renno have been questioned both in the press and in congress, and Reichstul has been determined to show that--given that his priority is to turn Petrobras into an aggressive, market-orientated company--they will no longer sign "sweetheart" deals with suppliers.

For much of 1999 and 2000, an inconclusive row dragged through the courts over the six Amethyst drilling platforms, two of which have been built by Marítima and Pride International in the Daewoo shipyards in South Korea. In August 2000, Petrobras overturned a Maritima injunction and cancelled the contracts for Amethysts 4, 5 ,6, and 7 after claiming that delays in the delivery of the rigs, meant that it no long had any obligation to take delivery or pay for them. Marítima has claimed that the state company had agreed to extend the timetable for the delivery of the equipment by 540 days. Petrobras has argued the extension is not a legally binding addition to its contract because it took the form of a letter, and not a legal document.

Earlier, in April 1999, Petrobras cancelled a contract the Amethyst 2 and 3 rigs because the delivery date had expired. Maritima said it was behind schedule because Davie Industries, the Canadian shipyard where the rigs were to be built, had filed for bankruptcy. As part of the Amethysts saga, Marítima also filed a series of lawsuits against its suppliers and contractors, including Norway's Ocean Rig.

At times, the dispute between Petrobras and Marítima has bordered on the ridiculous. When the giant P-36 platform arrived in Rio de Janeiro in 2000, the two companies held separate press conferences and cocktail parties. At last year's Rio Oil and Gas Show, Marítima attempted to rent space in areas surrounding the Petrobras stand, but was discretely turned down by the organizers. At a previous show, Petrobras constructed a large "wall" between its stand and that of Marítima, which had rented adjacent space.

Despite worsening relations with Petrobras, Marítima seems determined to expand its presence within the industry. In the second ANP licensing round in June 2000, Marítima and its financial partner Rainier, picked up four onshore blocks (BT-REC-3 and BT-REC-2 in the Recôncavo Basin, BT-POT-3 in Potiguar, and BT-SEAL-3 in Sergipe/Alagoas). Responding to those who question the company's ability to exploit the fields at the time, Marítima E&P Director Flávio Barreto assured reporters that "We have experience in the areas of drilling, boosting, completion, and the construction of production systems."