Petrofac Files for Administration, Threatening 2,000 Jobs in Scotland

Oil and gas services company Petrofac has filed for administration, placing approximately 2,000 jobs at risk in Scotland. The decision comes as the firm faces insolvency following the collapse of recent restructuring efforts, which were significantly impacted by a failed renewables contract in the Netherlands. On March 11, 2024, Petrofac announced to investors that it had applied to the High Court for the appointment of administrators.

The company employs over 7,000 people globally, with around 2,000 of those based in the UK, specifically in Aberdeen. This workforce includes approximately 1,200 offshore employees and an additional 800 in onshore training and operational roles. The situation escalated after Dutch electricity grid operator TenneT terminated a significant contract for the construction of wind farms, a move that played a crucial role in Petrofac’s financial distress.

Petrofac emphasized that the administration process will primarily affect its main holding company. The firm intends to continue trading and is exploring various options for restructuring, including potential mergers and acquisitions with key creditors. Corporate finance advisers from Teneo are set to assist throughout this administration process.

“When appointed, administrators will work alongside executive management to preserve value, operational capability, and ongoing delivery across the group’s operating and trading entities,” the company stated.

Petrofac has a notable presence in the UK, particularly in the North Sea oil sector, operating platforms for major clients such as BP and Shell. The company also maintains smaller offices in London, Woking, and Great Yarmouth.

In response to the administration filing, the Department for Energy Security and Net Zero (DESNZ) affirmed the UK government’s commitment to support Petrofac. A spokeswoman for DESNZ stated, “The UK arm of Petrofac has not entered administration and is continuing to operate as normal, as an in-demand business with a highly-skilled workforce and many successful contracts.” She added that the administration is linked to longstanding issues affecting the company’s global operations.

Petrofac, which was valued at around £6 billion at its peak in 2012, has experienced a significant decline in value, dropping to approximately £20 million when its shares were suspended in May 2023. This decline was exacerbated by an investigation by the Serious Fraud Office and the volatility of energy prices.

As Petrofac navigates this challenging period, the impact on its workforce and the broader implications for the UK energy sector remain to be seen. The company’s efforts to restructure and stabilize operations will be closely monitored by industry stakeholders and government officials alike.