Rigs report: Sembcorp subsidiary faces investigation in Brazil; Equinor, Transocean strike rigs deals

Singapore shipbuilder Sembcorp said it had become aware that Brazil’s Office of the Comptroller General of the Union (CGU) has published a notice in its Official Gazette "to the effect that CGU has initiated a preliminary administrative liability proceeding" against Estaleiro Jurong Aracruz.

The notice, according to Sembcorp, confirmed EJA is under investigation for "alleged irregularities" in its practices.

A later update from Sembcorp confirmed the CGU had begun its preliminary work on mobilising an investigation and the investigation is related to Brazil’s mammoth, high-profile and far-reaching bribery scandal known in Portuguese as “Operação Lava Jato” (Operation Car Wash).

"The proceedings relate generally to past conduct investigated by the Brazilian authorities in connection with Operation Car Wash, of which the company has previously made announcements, the latest being the circular to shareholders dated 31 January 2023," Sembcorp’s statement said.

"Further, the CGU has not brought any civil or administrative charges against the company or its subsidiaries. The company will continue to co-operate and work with the Brazilian authorities."

The shareholder circular Sembcorp referenced gave details of investigations relating to several drill rig construction contracts and warned investors of the potential for general reputational damage as well as operational, business and political risks in Brazil.

The contracts were secured in 2012, according to the company’s timeline, and three years later a former engineering manager of Brazi’s state-owned oil company Petrobras alleged money had been exchanged to secure the contracts.

The alleged bribes involved companies connected to an individual Sembcorp had used as consultants, and Brazilian authorities eventually, in 2019, executed a search warrant against EJA in relation to the investigation into alleged bribery. 

From there, the investigation expanded to include the former president of EJA who had left Sembcorp’s employment in 2015. After Sembcorp lodged "suspicious transaction reports" with Singapore’s police force, Brazil’s federal courts filed money laundering charges against the former EJA president in connection with the contracts awarded to Sembcorp.

The former Sembcorp employee was ultimately convicted in Brazilian court of crimes including corruption, money laundering and participation in a criminal organisation and sentenced to nearly 20 years in prison.

Sembcorp distanced itself from the employee and set up an internal investigations unit to review the case independently of other national authorities.

Singapore’s offshore shipbuilders have been the focus of multiple investigations in the Brazilian bribery saga over the last several years. 

In January 2023, Keppel Offshore & Marine (Keppel O&M) said it had settled a US$65M fine imposed by Brazilian authorities related to the Operation Car Wash bribery scandal. The fines were penalties imposed on Keppel O&M in relation to payments made by a former agent of the company to Petrobras, to win rig-building contracts.

At the end of February this year, after Keppel had cleared its fine, Singapore’s two largest offshore shipbuilders, Sembcorp and Keppel O&M completed a merger that had been two years in the making. The merger saw Keppel Offshore & Marine become a wholly owned subsidiary of Sembcorp.

In December 2022, Keppel reached a leniency agreement with Brazil’s Attorney-General’s Office and Comptroller General of the Union and committed to pay the approximately US$65M fine. The fine came in addition to a fine levied in December 2017 by authorities in Singapore, Brazil and the United States that saw Keppel O&M fined US$422M for its part in the Operation Car Wash scandal. Singapore’s Corrupt Practices Investigation Bureau Attorney-General’s Chambers have confirmed Keppel had paid its fines. 

Brazil’s Attorney General of the Union and CGU have a parallel mandate to enforce certain corruption laws.