Petrobras sought arbitration for Sete Brasil talks

State-controlled Petróleo Brasileiro SA unsuccesfully sought the appointment of arbiters to rework a long-term contract with debt-laden drilling rig leaser Sete Brasil Participações SA, according to three sources with knowledge of the situation.

The proposal, made in recent weeks, called on each party to name three mediators to rework the contract, said the sources, who requested anonymity since the plan is private. The contract between Petrobras and Sete Brasil has been in dispute for two years.

The fate of Sete Brasil, which Petrobras helped create in 2008 to manage the world’s biggest deepwater drilling fleet with $89 billion in orders, hinges on Petrobras’ willingness to sign the contract. Petrobras is Sete Brasil’s sole client and owns 5 percent of the company.

Sete Brasil’s main shareholders shunned the latest proposal and say the company should file for bankruptcy protection to press Petrobras into signing more favorable terms, the sources added.

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