World Wide Supply: Petrobras’ contract termination unlawful
Norwegian owner of offshore supply vessels, World Wide Supply (WWS), has accused Petrobras, the national oil company of Brazil, for an unlawful contract termination.
Petrobras in September terminated two of the four long-term platform supply vessels charters it had with WWS.
On September 16 Worldwide Supply AS received notice of termination of two the two charters following a 3 month “blocking period”. The termination is caused by the lack of renewal of the CAA (Certification of Charter Authorisation).
According to WWS, the renewal of the CAA for the two ships was “blocked” by a Brazilian-flagged vessel which according to Brazilian law has the preferential right to employment.
“Via the company’s Brazilian lawyer Petrobras has been notified that the termination is considered unlawful as the employment has not been conveyed to the Brazilian-flagged vessel. The company has also informed Petrobras that they have a contractual obligation to pay hire during the 3 months blocking period, equivalent to approximately USD 4.0 million,“ WWS, which owns a fleet of six platform supply vessels, said in a statement on Saturday.
The termination of the contracts has caused the company to have only two of the four vessels employed with Petrobras. These two remaining contracts expire in June 2018 based on the renewals of the CAA’s in June 2016 and June 2017.
Also worth noting, the two vessels working for Petrobras are the only two WWS’ vessels working at all. The PSV pair that worked in the North Sea spot market, has been laid up, and stacked in Alesund, Norway.
The company’s liquidity is now reduced to $5.6 million as of 30 September 2015.
“The company is thus in breach of the minimum liquidity covenant of USD 7.5 million set out in bond loan agreement with Nordic Trustee. The company’s liquidity will remain below the covenant in the loan agreement.“