North Sea Jobs Saved as HMRC Drops Challenge to Petrofac Deal

More than 2000 jobs in the North Sea appear to have been secured after HM Revenue and Customs abandoned a legal challenge that threatened to derail a rescue deal for Petrofac’s UK operations. The tax authority claims it is owed over £150 million by the struggling oil services group due to a historical tax dispute, arguing that the planned debt restructuring would unfairly leave it with only an estimated £3 million.

The decision not to appeal against a Scottish court ruling that dismissed its complaint paves the way for the sale of Petrofac to the American company CB&I. This development is particularly significant for the North Sea division, which was on the brink of insolvency and perilously low on cash. Should HMRC have persisted with its appeal, the tax authority risked receiving less than £200,000, and possibly the collapse of the business altogether.

Petrofac, a former FTSE 100 company, provides vital infrastructure services to the oil, gas, and broader energy sectors. Once employing approximately 8000 individuals globally, Petrofac entered administration in October due to a convergence of challenges, including a long-standing inquiry by the Serious Fraud Office, project delays, and excessive costs.

The asset solutions business within Petrofac, employing around 3000 staff globally—with approximately 2250 in the UK—was able to continue operations despite the parent company’s administration. A rescue deal was secured in December to sell this division to CB&I, with the condition that most of its debts, exceeding £1 billion, would be written off. HMRC’s legal challenge, however, contended that this restructuring was inequitable as other creditors would recover a higher proportion of their claims.

The Court of Session in Scotland ultimately rejected this argument, with Judge Lord Sandison a vocal critic of HMRC’s drawn-out pursuit of the funds, which stem from allegations of tax avoidance between 1999 and 2014, claims Petrofac denies. He noted that the debt was not assessed until 2020 and that its resolution was not expected to be determined until 2025, pointing out the lack of urgency in HMRC’s actions.

In response to the ruling, Petrofac expressed its commitment to finalising the sale to CB&I swiftly, viewing the transaction as a positive outcome for both the company and its skilled workforce. An HMRC spokesperson acknowledged the court’s decision and indicated that the delays were largely a result of the company’s own restructuring efforts.