Taxpayer support to the Brazilian energy project currently at the centre of huge corruption scandal included a £35m loan to help finance one of world’s largest oil platforms

This article is more than 5 years old

This article is more than 5 years old

The UK government provided hundreds of millions of pounds worth of support for a controversial energy project in Brazil that is now at the centre of a sprawling corruption scandal engulfing the country’s political and business elite.



Hundreds of contracts for energy projects, from refineries to oil rigs, have been implicated in the scandal which has seen executives at Brazil’s state-owned oil company Petrobras and many of its contractors charged in connection with alleged bribery and money-laundering.

The UK has provided significant financial support to numerous Petrobras deals, but most significant is a $52m (£35m) loan underwritten by the UK taxpayer in 2005 which helped finance construction of one of the world’s largest oil platforms.

The oil rig’s construction was one of the principal projects that generated bribes, according to a police testimony made by a former Petrobras executive turned key prosecution witness.

Despite the ongoing investigations, Whitehall trade officials are also actively considering giving further financial support to a project operated by two companies embroiled in the scandal.

Through the UK’s export finance agency (UKEF) and UK Trade and Investment (UKTI), the government routinely helps finance major oil and gas projects overseas, apparently flying in the face of pledges to withdraw precisely this kind of support.

Essential financial support for constructing the Petrobras oil platform known as P-52 came from UKEF while UKTI representatives based in Brazil assisted, enabling companies including Rolls Royce to secure the contracts.

Latest figures show UKEF has provided £1.7bn worth of financial support to fossil fuel projects around the world, from petrochemical plants in Saudi Arabia to pipelines in Russia.

UK loaned £1.7bn to foreign fossil fuel projects despite pledge Read more

In Brazil, the UK is helping to open up some of the world’s largest oil discoveries in recent years. The deepwater fields which Petrobras and other multinational oil companies are looking to exploit hold colossal, untapped reserves described by one industry executive as “the new North Sea of the South”.

The scandal – believed to be the largest in Brazil’s history – has intensified in recent weeks, sparking mass protests across the country. President Dilma Rousseff is facing increased pressure as senior members of her ruling party are under investigation by the supreme court for their alleged role in the scandal.

Hundreds of millions of dollars worth of bribes were allegedly skimmed from deliberately inflated Petrobras contracts, portions of which were paid to the president’s ruling party. Rousseff has denied knowledge of corruption despite chairing Petrobras’s board when much of the wrongdoing allegedly took place.

Witnesses have identified a raft of construction and engineering companies which allegedly paid bribes for Petrobras contracts. Two of these companies were significant beneficiaries of the UK’s package of support for the P-52 platform: Rolls Royce and a company majority owned by Singapore shipbuilder Keppel Corporation.

A former Petrobras executive, whose testimony is at the centre of the investigation, told police that a Keppel representative paid him and others – including Dilma Rousseff’s party – bribes specifically in relation to the P-52 contract.

This month, just as the scandal began to intensify, UKEF began considering a request to insure a multimillion dollar oil tanker in Brazil despite the fact its co-owners and operators, the Dutch shipbuilder SBM Offshore, and the parent company of its Brazilian joint venture partners, are under investigation.

On Wednesday SBM signed an agreement to cooperate with Brazilian authorities probing the scandal and last year two former Queiroz Galvão shareholders, the parent of SBM’s consortium partners, were arrested as part of the probe.

Over the past year, prosecutors in Brazil have heard how hundreds of millions of dollars worth of bribes were allegedly channelled to accounts at Swiss banks including HSBC Suisse, the bank at the at the heart of revelations about tax dodging and money laundering last month.

Brazilian journalists working with the International Consortium of Investigative Journalists have identified members of the Queiroz Galvão family and senior executives at its companies as clients of HSBC Suisse’s Geneva branch.

Asked by the Guardian whether UKEF was investigating its loans to Petrobras projects, a spokeswoman said the agency “continues to monitor developments with regard to Petrobras and will respond accordingly”. The spokeswoman added officials are undertaking due diligence in relation to insurance for the vessel and no decision has yet been made.

A spokesman for UKTI, whose representatives in Brazil have assisted UK firms in securing Petrobras contracts, said the agency had nothing to add to the UKEF statement.

Rolls Royce, who are currently facing separate bribery probes in the US and UK, said they have not received details of the allegations in Brazil. A spokesman added: “We have always been clear that we will not tolerate improper business conduct of any sort and will take all necessary action to ensure compliance.”

SBM Offshore told the Guardian that an internal investigation had raised “red flags” in Brazil but found no evidence of improper payments to government officials. A spokeswoman emphasised the company is now under a new management regime and said a settlement with Dutch prosecutors “has closed a chapter from the past”.



A spokeswoman for Keppel said the company strongly refutes allegations made regarding its Brazilian subsidiary, adding its employees comply with “applicable laws and regulations of the countries in which we operate, including anti-bribery laws”.

Responding to the Guardian’s questions, a spokeswoman for Queiroz Galvão said the group “denies any illicit payments to public officials in order to obtain contracts or benefits”, adding that the company’s contracts and activities adhere to Brazilian law. She said: “Queiroz Galvão states that any assets of company shareholders that could possibly exist in bank accounts outside Brazil have been strictly registered under Brazilian law and informed to legal authorities”.

This week marks the one-year anniversary of the sweeping investigation into the Petrobras scandal, known as “Operation Car Wash”.

Prosecutors – who are probing hundreds of companies and liaising with authorities around the world in an effort to uncover a sprawling network of bribery, money laundering, tax evasion and even drug trafficking – have said their investigation is far from complete.

