Investigation On Corruption In Petrobras and Sete Brasil: What Does It Mean For Keppel Corporation Limited?

Brazilian oil & gas company Sete Brasil had recently declared bankruptcy. Given that Sete Brasil is one of the largest customers of Keppel Corporation Limited (SGX: BN4), the news should be rather unpleasant for the latter. But, there might be worse things to come for Keppel Corporation.

Back in 2015, Keppel Corporation announced that investigations were started for certain allegations raised by Pedro Jose Barusco. Apparently, illegal payments were made by Zwi Skornicki in connection with contracts signed between Keppel Corporation and Petrobras and/or Sete Brasil.

In an update last week by Keppel Corporation, it was revealed that Skornicki had been arrested and officially charged for corruption. The Brazilian Public Prosecutor’s Office had found proof of not just corruption on the part of Skornicki, but also other illegal activities such as money laundering.

What does it all mean

Keppel Corporation had already suspended any business dealings with Skornicki early last year. The company also stated that it has zero-tolerance against any illegal activities.

Given the situation Petrobras is in right now, the company might not be willing to spend on any major capital expenditure programmes anytime soon. As Petrobras is the largest end-customer for many oil and gas services providers in Brazil, Keppel Corporation’s Brazil-related business should be under pressure now.

With a possible slowdown in orders from Petrobras and the bankruptcy of Sete Brasil, it is hard to see how Keppel Corporation’s operations in Brazil can do well this year. On top of that, the on-going investigations might even create more problems for the company given its relationship with Skornicki.

At the moment, it seems a storm is brewing for Keppel Corporation in Brazil.

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The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. Motley Fool Singapore writer Stanley Lim owns shares in Keppel Corporation.