Petrofac on the Brink North Sea Energy at Risk as Government Monitors Collapse

Petrofac, one of the United Kingdom’s leading offshore oil and gas contractors, faces a critical juncture as it scrambles to secure its financial future. The Aberdeen-based company, employing 2,000 skilled UK workers and 8,000 worldwide, has entered crisis talks with its lenders after the loss of a key contract left it teetering on the edge of administration.

Officials from the Department for Energy Security and Net Zero are reportedly on high alert due to Petrofac’s essential role in North Sea operations. As the “duty holder” for at least two major offshore platforms, Petrofac has legal responsibility for platform safety, working with industry giants such as Shell, BP, Ithaca Energy and TotalEnergies. A potential collapse raises the spectre of the UK taxpayer footing safety and operational costs.

The company’s trouble intensified last week when TenneT, the power grid operator for the Netherlands and much of Germany, cancelled a multibillion-pound contract. This project, in partnership with Hitachi, had involved building offshore platforms and converter stations for six wind farms and was reportedly worth EUR 13bn. The loss of this contract followed a series of setbacks in Petrofac’s overseas divisions, notably financial difficulties in Abu Dhabi, and failure to resolve historic challenging contracts.

Compounding issues include a stalled clean fuels project at a Thai refinery, pandemic-related delays that disrupted cash flow and forced halts in debt repayments, and reputational damage from a major corruption scandal resulting in a £77 million fine by the Serious Fraud Office. A previous attempt to raise $355 million in rescue funding became entangled in legal challenges, further prolonging uncertainty for investors and creditors.

Analysts believe a breakup of the business is inevitable, with core UK operations seen as vital to the nation’s energy security and skilled jobs. Discussions continue throughout the weekend as Chief Executive Tareq Kawash leads efforts to preserve the company as a going concern.

The government will be closely monitoring outcomes, aware that any disruption to Petrofac’s operations could have significant implications for Britain’s offshore energy industry and the wider economic landscape.