North Sea: 2,000 jobs at risk as oil and gas firm Petrofac appoints administrators
Thousands of Scottish jobs are at risk following the announcement from Petrofac
Oil and gas services firm Petrofac has filed for administration in a decision described as “catastrophic” for the North Sea, amid fears thousands of Scottish-based jobs are at risk.
The company, which employs more than 7,000 workers globally, is tumbling into insolvency after recent restructuring plans collapsed in the wake of a failed renewables contract in the Netherlands.
Around 2,000 of the firm’s workers are based at its North Sea hub in Aberdeen.
On Monday, the company told investors that it had applied to the High Court to appoint administrators. But the firm said its North Sea business would continue to operate as normal for now.
Petrofac said it would now enter insolvency after Dutch electricity grid TenneT terminated a major contract to build windfarms. The company stressed the administration would affect the group’s main holding company.
It will continue to trade and assess options for an alternative restructuring, with different merger and acquisition options also being explored with its key creditors.
Posted on social media, First Minister John Swinney Mr Swinney described the announcement as “incredibly concerning news for employees of Petrofac, their families, and the wider community”.
“The UK government must urgently revisit the energy profits levy,” he posted on X. “[The Scottish Government] stands ready to support all those affected by today’s news.”
But Energy Minister Michael Shanks accused Mr Swinney of spreading “deliberate misinformation” and being “reckless” when talking about the company. He told MPs in the House of Commons there was “reason to be optimistic about a commercial resolution” for Petrofac.
Mr Shanks stressed the application to appoint administrators applied to the “top-level holding company, Petrofac Ltd, which has no employees”.
“Those jobs have been protected, and there are 2,000 workers today waking up doing the same job as they were doing last week,” Mr Shanks said. “All the signs are that there is a viable long-term future for this company.”
Petrofac, which was founded in Texas in 1981, designs and builds facilities for oil, gas and renewables projects. The company has UK offices in Aberdeen, London, Woking and Great Yarmouth.
Aberdeen Central MSP Kevin Stewart described the announcement as “incredibly concerning”.
"We are seeing a succession of companies either cutting operations in the North East or leaving altogether, and it's incumbent on policy makers in London to reflect on that,” he said.
“Scotland's abundance of energy resources has long been the backbone of our economy, and the SNP is determined to see that continue. However, Labour's energy profits levy and empty promises in relation to GB Energy are putting jobs at risk and keeping bills at record levels.”
Advisers at corporate finance firm Teneo are expected to advise over the administration.
“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 said.
Petrofac’s UK business is based in Aberdeen and is involved in the operation of North Sea oil platforms for firms including BP and Shell.
The company was worth around £6 billion at its peak in 2012, but has slumped in recent years. It was worth around £20 million when its shares were suspended in May after being severely impacted by an investigation by the Serious Fraud Office and volatile energy prices.
Andrew Bowie, shadow secretary of state for Scotland, said: “This devastating announcement from Petrofac is catastrophic for the North East and highlights the economic damage being caused by both Labour and the SNP’s opposition to oil and gas.
“The consequences of Labour’s harmful sanctions of increasing the windfall tax, ending the investment allowance and opposing all new oil and gas licences are now being felt, resulting in the loss of thousands of jobs.
“At the heart of this are Petrofac’s staff, and my thoughts go out to the employees whose jobs have been put at risk.
“Keir Starmer and [UK energy secretary] Ed Miliband’s desire to kill off the industry will force us to import expensive fossil fuels from overseas with a far higher carbon footprint.
“Petrofac’s decision is disastrous for Scotland and must act as a catalyst for both Labour and the SNP to support the sector, instead of turning their backs on it.”
Scottish Conservative shadow energy secretary Douglas Lumsden added: “Labour and the SNP’s irrational war on oil and gas sector is an act of national self-harm – driving up bills, costing jobs and jeopardising our energy security.
“Business are folding because both governments are decimating the industry. We all want to cut emissions, but not at any cost.”
Alan Stewart, Aberdeen-based partner at accountants and advisors MHA, described Petrofac’s administration as “another stark warning from the North Sea”.
“Fiscal instability, unclear policy and poor project visibility are driving distress across the supply chain,” he said.
Pamela Muir, insolvency and restructuring partner at Thorntons, said the ripples of what she described as a “financial storm” would be felt across the North Sea.
“Administration is the UK’s main business rescue regime,” she said. “While it signals financial distress, it doesn’t necessarily spell the end. The process is designed to give breathing space so administrators can try to save parts of the business, restructure debt and protect as much value as possible.
“For suppliers and employees, it’s still a period of deep uncertainty. Suppliers trading with a company in administration will be paid for anything supplied during the process, but more historic debts may go unpaid – a major worry for firms that have extended credit.”
She added: “Ultimately, it’s too early to know how this will play out, but the ripples of this financial storm will be felt across the North Sea.”
A Department for Energy Security and Net Zero (DESNZ) spokesperson said: “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.
“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.”
A Petrofac spokesman said: “Petrofac has a number of fundamentally strong businesses and we are focused on delivering the best possible outcome for them through this process.
“Our long-established North Sea business continues to operate as normal, and management are working to minimise disruption for clients and employees.”
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