Oil and gas engineering giant Petrofac has entered administration following contract losses and financial strain, but says its North Sea operations will continue as normal.
Energy services group Petrofac, which employs about 2,000 people in Scotland, has filed for administration after a turbulent year marked by cancelled contracts, delayed payments, and rising costs. The company confirmed that it has applied to appoint administrators for its holding company while it continues to explore “alternative restructuring options.”
In a statement, Petrofac said administrators would work to “preserve value, operational capability and ongoing delivery” while ensuring that core operations in the UK North Sea remained unaffected.
“Petrofac has a number of fundamentally strong businesses, and we are focused on delivering the best possible outcome for them through this process,” a company spokesperson said. “Our long-established North Sea business continues to operate as normal, and management are working to minimise disruption for clients and employees.”
Offshore contract loss triggers collapse
The decision follows the termination of a major offshore wind contract by Dutch grid operator TenneT, which scuppered a planned financial restructuring deal that had been key to Petrofac’s recovery.
Founded in Texas in 1981 and headquartered in London, Petrofac designs and builds facilities for the oil, gas, and renewable energy industries, providing engineering, project management, and logistics services. It has supported North Sea operations for major clients including BP and Shell.
Once valued at around £6 billion and listed on the FTSE 100, Petrofac’s market worth has since plummeted. The company’s shares were suspended in May when its valuation fell to just £20 million.
A combination of delayed contract payments, cost inflation, and the aftermath of a Serious Fraud Office (SFO) investigation has weighed heavily on its balance sheet in recent years.
Industry and political reaction
The Aberdeen and Grampian Chamber of Commerce said it was “deeply concerned” about the development, warning that Petrofac’s difficulties come “at an already worrying time for the North Sea supply chain.”
Chief executive Russell Borthwick said:
“Thousands of skilled jobs across the region depend on companies like Petrofac, which sit at the heart of both our oil and gas and energy transition sectors. This is another stark reminder that the UK government must urgently act to restore confidence and stability in the energy industry.”
Scottish First Minister John Swinney described the situation as “incredibly concerning” and said his government was ready to support affected staff. He also urged Westminster to “urgently revisit” the 78% windfall tax on North Sea oil and gas profits.
However, UK Energy Minister Michael Shanks rejected suggestions that the tax was responsible for Petrofac’s collapse, accusing the Scottish government of spreading “deliberate misinformation.”
A spokesperson for the Department for Energy Security and Net Zero said the administration resulted from “long-standing issues in Petrofac’s global operations,” adding:
“The government will continue to work with the UK company as it focuses on its long-term future.”
