Petrobras threatens to cancel Comperj contract

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Wednesday, September 30, 2015

Brazil's Petrobras has warned it could cancel a 1.8bn-real (US$440mn) contract to build a natural gas processing unit if developer QGIT carries out its threat to halt work.

Wednesday's announcement comes a day after the QGIT consortium forecast an indefinite strike from October 1 unless contract terms were renegotiated.

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The unit, known as UPGN, is part of Petrobras' troubled Comperj petrochemical complex being built in Itaboraí, on the outskirts of Rio de Janeiro.

In a statement, Petrobras said it would consider "applying all available penalties" if the project is halted, including an option to rescind its contract.

"Petrobras has met all of its obligations and will not accept any renegotiation," the company said.

QGIT comprises Tecna, Iesa and Queiroz Galvão. The latter two are under investigation by federal police as part of Brazil's Lava Jato corruption probe.

The consortium said it has laid off 800 workers from the project due to "unsustainable impacts stemming from the economic crisis and its effects on the exchange rate."

DELAYS, COST OVERRUNS

Petrobras is said to be seeking private investment of US$2.3bn to complete Comperj's first stage, which also includes a 165,000b/d refinery.

Last month Petrobras engineering director Roberto Moro told a Rio state parliamentary inquiry into corruption that the amount corresponds to the final 15% of the project's initial phase.

According to Petrobras downstream director Jorge Celestino, who also testified during the inquiry, Comperj's start-up will be postponed until 2020 if an investor is not immediately secured.

Originally scheduled to be fully operational by 2013 at a cost of US$$6.5bn, the complex's construction budget has ballooned to US$47.7bn.