Bloomberg News

Petrobras America Sues Over Broken Chain on Gulf Oil System

March 26, 2012

Petrobras America Inc. (PETR4) sued marine chain-maker Vicinay Cadenas SA for at least $180 million over losses allegedly caused by a broken chain that let parts of a floating oil production system sink and drift away in the Gulf of Mexico last year.

The Houston-based unit of Brazil’s state-controlled oil company Petroleo Brasileiro SA accused Vicinay of hiding “unauthorized and defective repair welds’’ in a set of marine chains the Spanish firm designed and built to serve a floating production system at the company’s Cascade and Chinook oil fields in the Gulf of Mexico. The fields are about 160 miles (257.5 kilometers) south of New Orleans.

After less than two years’ use, at least one 171 millimeter (6.7 inches)-diameter link on the chains broke and let part of Petrobras’s Chinook FSHR No. 1 floating production system sink to the sea floor. A second part floated 36 miles away before it was recovered, according to a complaint filed March 23 in federal court in Houston.

“Vicinay warranted that the tether chain system would have a field life, without maintenance or replacement, of 30 years,’’ Petrobras America said in a complaint filed by its lawyer, Ileana Blanco. “A reasonably prudent inspection of the chain by Vicinay would have revealed, and did reveal, unauthorized and dangerous repairs, defects and deficiencies in the chain.’’

Petrobras America, spent $180 million to recover, remove and repair damaged parts of the floating production system, which consists of multiple buoyant components tethered to a storage vessel much like an oil tanker. The lawsuit seeks additional unspecified damages for lost oil and gas production from the Chinook field during the repair period.

An e-mailed request for comment on Petrobras’s lawsuit, sent after regular business hours to Vicinay’s headquarters in Bilbao, Spain, where the tether chains were also manufactured, wasn’t immediately answered.

Petrobras America’s insurer, a Lloyd’s of London underwriting syndicate, is participating in the lawsuit with Petrobras.

The case Petrobras America Inc. v. Vicinay Cadenas SA, 4:12-cv-0888, U.S. District Court, Southern District of Texas (Houston).

To contact the reporter on this story: Laurel Brubaker Calkins in Houston at laurel@calkins.us.com.

To contact the editor responsible for this story: Michael Hytha in San Francisco at mhytha@bloomberg.net.


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