By Braden Reddall

Feb 11 (Reuters) - A seven-year dispute between U.S. engineering company KBR Inc and a Brazilian client over an oil project off the coast of the country settled last month with a $219 million payment by Halliburton Co, KBR's former parent.

According to a Halliburton filing on Monday, the payment was made in January to Barracuda & Caratinga Leasing Co (BCLC) to settle the dispute over failed bolts on subsea flowlines that were part of a $2.5 billion oilfield contract awarded to KBR.

BCLC, controlled by giant Brazilian oil company Petrobras , first filed for arbitration of the issue in March 2006. The arbitrators found in BCLC's favor in late 2011, and KBR challenged the decision in a New York court.

Under the 2007 separation agreement between KBR and Halliburton, the oilfield services giant agreed to shoulder any Barracuda-Caratinga award against KBR. Halliburton disclosed in its annual report on Monday that it recorded an $80 million tax benefit in 2012 related to the satisfaction of this obligation.

Follow us on Twitter @ReutersLegal | Like us on Facebook