Shortly following the aftermath of the corruption scheme, allowing Petroleo Brasileiro SA Petrobras (ADR) (NYSE:PBR) to enjoy a sigh of relief, the latest trouble that has hit the company is a court decision; according to which, the energy giant has been suspended from bidding for the lease of a first floating production, storage, and offloading (FPSO) platform for the lucrative Libra field. In response to that, the company has announced to file an appeal in the court.
Sinaval, the association of Brazilian shipbuilders, got hold of an injunction that suspended Petrobras from taking part in the bid. Reason behind the suspension was that the company failed to abide by the country’s rules for local content.
Libra, the offshore oil field in the Santos basin is the country’s biggest crude reserve containing nearly 8-10 billion barrels of crude. Having such a large amount of oil makes Libra a great potential for the state-run company’s path to recovery. While many Big Oil companies solely had to face the economic slowdown in oil & gas prices, times were more different, tougher for Petrobras. The company not only went through the plunging crude oil environment, but was also trapped in the corruption scandal; the latter dented its financial profile as well as shook Brazil’s economy. Its top executives were charged with several lawsuits over reportedly having received bribes for inflating engineering contract prices.
First production from the Libra oil field is slated to come up in 2020. Although the first decision was won by Petrobras that argued that it abided by the local laws, but the tenders were quite expensive. However, the latest decision comes out in favor of Sinaval.
It shall be noted that apart from the energy major that has a 40% holding in Libra, other Big Oil like Royal Dutch Shell plc (ADR) (NYSE:RDS.A) have 20% holding while French oil giant Total SA (ADR) (NYSE:TOT) and CNPC have 20% and 10%, respectively.