Singapore shipbuilders in Brazilian bribery

June 24, 2015

High profile bribery investigations continue to multiply in Asia.

Two Singaporean shipbuilders, Keppel FELS and a Sembcorp Marine (SMM) subsidiary, Jurong Shipyard are allegedly linked to Brazilian bribery scandals.

According to a Brazilian court testimony this week, the two offshore engineering firms are under allegations for paying bribes to win contracts to build 21 deepwater drilling vessels worth US$800 million each, Bloomberg reports.

Sete Brasil, a company set up by Petrobras and Brazilian banks, awarded the contracts for the construction of deepwater rigs for the purpose of leasing out to state-owned oil producers.

Former Petrobras and Sete director, Pedro Barusco, who had earned $97 million on bribes and shipyard payments, first made the allegation in February 2015.

An Oversea Chinese Banking Corp. (OCBC) analyst, Low Pei Han noted in a report that Brazil-related orders account for 40-50% of SMM’s order book, and that more than 80% of the first drillship has been completed, 55% for the second, and 30% for the third.

“The average contract price for each drillship secured by SMM from Sete was $800 million in 2012, higher than average at that time due to local content requirements. The question is how much these rigs will fetch now, should they be sold in the open market, especially so during this current down market.” Pei Han stated.

A report by Maybank analyst, Yeak Chee Keong noted that Keppel has been contracted to build six semisubmersibles worth $4.9 billion, SMM is constructing seven drillships worth $5.6 billion and Sete is two months in arrears in its payments to the shipyards.

“Our key concern is if Sete would have sufficient funds to complete the rig projects. A loan is a much needed lifeline to prevent its technical default and to ensure the continuity of its projects,” Chee Keong said.

Both firms have denied their involvement in separate statements.

Keppel said the group prohibits bribery and work in compliance with the laws of the countries they operate. While, SMM commented that the group did not make any illegal payment and the group's policies prohibit bribery and unethical behavior as well.

Former China National Petroleum Corp. (CNPC) senior executives are also currently caught in ongoing corruption cases in China.

Image: Petrobras semisubmersible rig / SMM

Read more

Former CNPC head corruption trial

CNPC deputy corruption suspect



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