Petrobras – Early termination of natural gas supply contract to UTE Cuiabá

Rio de Janeiro, June 8, 2017 – Petróleo Brasileiro S.A. – Petrobras informs that it notified the company Âmbar, which belongs to the J&F economic group, of the early termination of the natural gas supply contract to the thermal power plant UTE Mário Covas (UTE Cuiabá), due to the breach of the contractual clause addressing anti-corruption legislation.

The contract with Âmbar was executed on April 13, 2017 and sets forth a clause in which the aforementioned company stated that there was no payment or offering of any undue advantage to any public authority. However, Petrobras has become aware of recordings from the plea bargain agreements by J&F group executives, that acts in violation of the anti-corruption legislation in force have been committed.

Petrobras shall also exercise the prerogative to collect indemnity for the breach of contractual terms, in the amount of R$ 70 million, considering the remaining contractual term between the effective date of termination, which occurs 10 days after the notification, and its original termination, which would be on December  31, 2017.

It should be clarified that during contract negotiations, Petrobras did not accept the demand made by Âmbar to ground contractual price on import prices of gas from Bolivia, for such prices are below the conditions set forth in the company’s current pricing policy. As such, the price conditions agreed upon were based on market criteria that reflect contracts signed by Petrobras with other clients. In the contract under termination, the current price is US$ 6.07/MMBtu, whereas the value of Bolivian imports is US$ 4.29/MMBtu.

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