Oil and gas company Petrofac applies for administration, jeopardizing thousands of jobs

One of the largest contractors of oil and gas in the North Sea, Petrofac, has entered administration endangering the employment of over 2,000 people in Scotland. The services provider in the energy sector indicated that it had petitioned the high court of England and Wales to name administrators, following its loss of a large offshore wind in its inability to meet its contractual duties.

Petrofac, which has approximately 7,300 employees around the world, claimed that the administration, presumably to be accomplished by the business services company Teneo, would only affect its ultimate holding company and that it would still be in business in the process.

However, any doubt on the viability of the firm may increase the political pressure on the UK government who may also meet backlash regarding their intentions to curb the climate crisis by preventing the acquisition of new North Sea oil licenses to explore them.

On Monday, the department of Energy Secretary Ed Miliband asserted that it was at the forefront in all sections of government to assist Petrofac UK arm which has approximately 2000 individuals employed in its North Sea center at Aberdeen.

The company has long been financially commercially in distress, beginning with a Serious Fraud Office probe in 2017 that eventually led to conviction in 2021 of not stopping bribery and paying over $100m in penalities. Such an inquiry complicated the winning of work by the company. It has recovered at the beginning, and then the coronavirus pandemic contributed to its misfortunes.

It has been over a year since Petrofac has been attempting to reorganise its finances, and a formal plan was passed in the high court in May. It has liabilities of up to that which may be $4bn (£3bn), judged in July in one suit instituted by a group of creditors.

However, on Thursday, it was announced that the company informed investors that an agreement was cancelled by TenneT, a European electricity grid operator, and its largest customer, thus no more solvent restructuring could be done. The TenneT contract involved construction of offshore wind projects in the Dutch coast.

The company said: “Having carefully assessed the impact of TenneT’s decision, the board has determined that the restructuring, which had last week reached an advanced stage, is no longer deliverable in its current form.”

A spokesperson for the Department for Energy Security and Net Zero said: “The UK arm of Petrofac has not entered administration and is continuing to operate as normal, as an on-demand business with a highly skilled workforce and many successful contracts.

“Petrofac’s administration is a product of long-standing issues in their global business. The government will continue to work with the UK company as it focuses on its long-term future.

“Ministers are working across all parts of government led by DESNZ in support of this.”