North Sea Services Major Petrofac Enters Administration

Written by Martin Lynch, European News Editor for Industrial Info (Galway, Ireland)

Summary

Petrofac (London) has entered administration in the U.K., putting 2,000 jobs at risk after losing a major offshore wind services contract with TenneT (Arnhem, Netherlands). It is the latest in a series of financial troubles and scandals for the company in recent years. 

Leading U.K. energy services company Petrofac (London) has entered administration putting up to 2,000 Scottish jobs at risk after losing a major contract for the connection of offshore grid systems in the Netherlands and Germany.

Why Petrofac Went Into Administration

The company, which employs 7,300 globally, said that it has applied to appoint administrators for its holding company, but claimed that "alternative restructuring options" were being explored with its key creditors. Entering administration follows a decision by Dutch national grid operator TenneT - Petrofac's largest customer - to end Petrofac's involvement in a series of major offshore wind substation projects over its failure to meet contractual obligations. Petrofac stated: "Having carefully assessed its options, and the impact of TenneT's decision to terminate Petrofac's scope of work on the 2-gigawatt (GW) programme in the Netherlands, the Directors of Petrofac Limited (the Group's ultimate holding company) have applied to the High Court of England and Wales to appoint administrators to Petrofac Limited. This is a targeted administration of the Group's ultimate holding company only."

Strong U.K. Operation

It is hoped that the company's subsidiary operations, including a "growing" U.K. arm, based in Aberdeen and employing 2,000 people, will keep running as normal while restructuring talks continue. Around 1,200 of these are based offshore on rigs owned by oil and gas companies, with another 800 onshore in training and operational roles.

Losing its Biggest Offshore Contract

TenneT stated: "In 2024 Petrofac had been working on a financial restructuring of its business. In the past, TenneT has worked extensively with the Petrofac/Hitachi Energy consortium on mitigation measures. Since Petrofac has not been able to meet its contractual obligations, TenneT has exercised its right to partial termination of the contract related to the Petrofac scope. Hitachi Energy and the replacement contractor will be responsible for the project portfolio of the Dutch offshore grid connections IJmuiden Ver Alpha, Nederwiek 1, Nederwiek 3, Doordewind 1, Doordewind 2 and the German offshore grid connection, LanWin5." Industrial Info is tracking 23 TenneT projects worth US$2.7 billion. Subscribers to Industrial Info's Global Market Intelligence (GMI) Project Database can click here for the reports.

The Impact of Fraud Charges

It is the latest in a series of financial setbacks for the company, which has been struggling to restructure its operations following a damaging Serious Fraud Office investigation by U.K. authorities and a number of profit warnings. In 2021, after a four-year investigation by the Serious Fraud Office, Petrofac was fined £70 million (US$92 million) after admitting to a systemic culture of bribery to secure large contracts in three Middle Eastern countries: Saudi Arabia, Iraq and UAE. The former global head of sales, David Lufkin, pleaded guilty to 14 counts of bribery to win contracts worth £5.5 billion (US$7.3 billion) over a 6-year period. 

Key Takeaways

• Petrofac has entered administration in the U.K., putting 2,000 jobs at risk
• Administration preceded by being dropped from major offshore services contract by its biggest customer, TenneT
• Company fortunes severely impacted by damaging bribery charges case in the U.K. between 2017-21

About Industrial Info Resources

Industrial Info Resources (IIR) is the leading provider of industrial market intelligence. Since 1983, IIR has provided comprehensive research, news and analysis on the industrial process, manufacturing and energy related industries. IIR's Global Market Intelligence (GMI) helps companies identify and pursue trends across multiple markets with access to real, qualified and validated plant and project opportunities. Across the world, IIR is tracking over 200,000 current and future projects worth $17.8 Trillion (USD).