Saipem cheers overturning of two-year ban on public contracting activity in Brazil

Italy’s engineering, drilling, and construction services provider Saipem has welcomed the lifting of restrictions on new contracts in Brazil, after being banned from striking deals with the country’s public administration earlier this year. This ensures the firm’s return to the Brazilian oil and gas stage.

After the Controladoria-Geral da União (CGU) looked into accusations against Saipem, a subsidiary of the Italian energy multinational Eni, regarding involvement in irregularities with Petrobras, which allegedly occurred during the execution of a contract to carry out the installation of an underwater gas pipeline in which its two business units, Saipem and Saipem do Brasil, were involved in 2011.

As a result, the CGU, through the Inspector General of the Union (CRG), instituted, on April 30, 2019, an administrative accountability process (PAR) against the Italian player to investigate those alleged irregularities that happened during the execution phase of the contract for the installation of the submarine gas pipeline connecting the Lula and Cernambi fields in the Santos Basin, 280 km off the coast of the State of Rio de Janeiro.

According to the CGU, one of the possible irregularities would be the payment of a bribe to a public agent at Petrobras for assistance in a competition, which resulted in the signing of a contract in December 2011. These irregularities were investigated as part of Operation Lava Jato, resulting in the conviction of one of Saipem’s representatives in Brazil and a former director of the state-owned energy giant.

The Brazilian administrative authority issued on January 12, 2024, its final ruling in the administrative proceedings initiated against Saipem and Saipem do Brasil regarding alleged irregularities in the award of a contract for the gas pipeline installation by the BM-S-11 consortium.

While the ruling replaced the CGU’s previous interim decision, consisting of the ban on contracting with the Brazilian public administration issued on December 29, 2022, and substituted it with a “temporary” suspension limited to a period of two years, Saipem and Saipem do Brasil were determined to appeal it, deeming the decision “inconsistent” with what they demonstrated during the proceedings. 

As a result, the Federal District Court of Brasilia has annulled the order of the CGU which prohibited the Italian player’s affiliates from engaging in contracting activity with the Brazilian public administration for two years. In response to the court’s decision, Saipem said it was pleased to learn that the grounds of appeal formulated by the two companies’ defenses were upheld.

“Since this is a ruling nullifying an administrative measure, under Brazilian law, an appeal phase must now follow, during which the effects of the annulment ruling are suspended. Saipem SA and Saipem do Brasil will continue to take all necessary steps to ensure the protection of their interests in the continuation of the proceedings,” according to the Italian firm.

Saipem, which recently completed an export trunkline installation offshore Australia, has won multiple new deals over the past few months, including a front-end engineering design (FEED) contract for a proposed liquefied natural gas (LNG) project off the coast of Mozambique as part of a consortium with McDermott and China Petroleum Engineering and Construction Corporation (CPECC).

Before its win in Mozambique, the Italian player got a $2 billion contract for work at an oil and gas field in the Arabian Gulf off Saudi Arabia’s east coast.