HRT Taken to Arbitration by Supplier in Amazon Oil Deal

HRT Participacoes em Petroleo SA, the oil startup that failed to find crude in the Brazilian Amazon, is being taken to arbitration for allegedly ceasing payments on a seismic analysis contract.

GeoQuasar Energy Solutions Participacoes Ltda., a Rio de Janeiro-based oil services company, commenced arbitration proceedings Feb. 27 at the International Chamber of Commerce against an HRT unit, according to a copy of the filing obtained by Bloomberg News. The company seeks at least 67.3 million reais ($29 million) in payments from the dispute, the document said. That represents a quarter of HRT’s market value.

HRT, also based in Rio, hasn’t received notification of the case, it said in an e-mailed response to questions. GeoQuasar declined to comment. ICC, as the Paris-based organization that hosts the International Court of Arbitration is known, said it couldn’t confirm the case, citing confidentiality rules.

HRT is at least the second Brazilian commodities startup facing arbitration proceedings since early February after scaling back projects on missed production targets. Eike Batista’s MMX Mineracao & Metalicos SA was taken to arbitration on Feb. 7 by cargo operator MRS Logistica SA for allegedly cutting iron-ore volumes on a railway, according to a copy of the filing obtained by Bloomberg News. MMX declined to comment when contacted by telephone and e-mail at the time.

GeoQuasar started seismic work for HRT in December 2010 in the Solimoes basin after signing a contract in September, according to an HRT regulatory filing from May 14, 2011. It was listed as one of the main HRT suppliers at Solimoes in the prospectus for the explorer’s October 2010 initial public offering.

‘No Alternative’

In seismic analysis for the oil industry, a company collects geological data to identify and study potential hydrocarbons deposits.

The companies signed a second, 18-month contract worth 108.5 million reais on April 8, 2013 for additional Solimoes seismic exploration including compensation for damages generated during the first agreement, according to the arbitration document by GeoQuasar. HRT denounced the second contract without reason three months after the signature and notified GeoQuasar, the document said.

“After several fruitless attempts to resolve this dispute in friendly terms, GeoQuasar has no alternative but to present this arbitration request to be compensated not only for the losses and harms suffered by this HRT breach of contract, but also for other countless damages derived from it,” GeoQuasar said in the filing.

Request Rejected

HRT returned two Solimoes blocks to Brazil’s oil regulator in August after failing to find commercially viable deposits. In January, the regulator rejected a request to extend the exploration period at three other blocks, according to its website. In Brazil, oil companies have to present a development plan after exploration periods expire to retain concessions.

HRT raised $1.5 billion with the share sale and said its acreage in the Amazon could hold “super giant” deposits of light oil, helping the company’s market value surge to 10.1 billion reais on March 17, 2011. Instead, it found natural gas, which is more expensive to transport and worth less than oil. HRT’s value slumped 98 percent since then to 289 million reais.

The startup reduced its workforce to about 150 this year from 600 in 2011, when it began exploring in Solimoes. Moscow-based partner Rosneft OAO agreed to increase its stake to 51 percent and take operational control of the project, HRT said in a Feb. 26 presentation.

Shares of HRT rose 3.2 percent to 96 centavos at the close in Sao Paulo today, boosting its gain this year to 5.5 percent.

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