Petrofac — once a Dh30 billion EPC powerhouse — under financial pressure
Published: 24 November 2025 | By Calm Gulf Life Blog
Petrofac’s collapse is a cautionary tale of how prolonged ethical failures, high leverage, and a reliance on a few big contracts can lead to catastrophic failure — even for a company once valued at more than **Dh30 billion**. This is the complete, detailed timeline and analysis of what went wrong, and why it matters for the Gulf energy sector.
1. Origins and Ascent: How Petrofac Became a Giant
Founded in 1981, Petrofac grew from a small service provider into an international engineering, procurement, and construction (EPC) powerhouse. Over several decades, it won major contracts in oil-and-gas infrastructure, refinery projects, and later moved into renewables and power. Its footprint extended across the Gulf region (Saudi Arabia, UAE, Kuwait, Oman) and into Europe and Africa.
Petrofac’s success was driven by technical expertise and aggressive bidding. But beneath that, regulatory investigations later revealed systemic misuse of third-party agents, bribes, and unethical win-rate tactics — especially in the Middle East.
2. Corruption Scandals & Legal Fallout
The UK’s Serious Fraud Office (SFO) opened a long-running investigation into Petrofac’s business practices, especially in the Middle East.
In 2021, Petrofac pleaded guilty to **seven counts of failing to prevent bribery**, and was fined **£77 million**.
These corporate-level convictions were tied to widespread corruption. For example, one former executive admitted to arranging **$30 million in payments** to agents to help secure Middle Eastern contracts.
3. Rising Debt and Financial Strain
As reputational damage grew, Petrofac’s business momentum began to slow. Cash flow tightened due to more stringent client scrutiny and lower-risk appetite.
To stabilize, the company initiated a major financial restructuring. In September 2024, Petrofac reached an **in-principle agreement** with noteholders and key creditors to convert the majority of its debt into equity, raise new funds, and restructure guarantees.
By February 2025, Petrofac secured **US$80 million** in cash collateral to support performance bonds for ongoing E&C contracts.
4. Court-Led Restructuring and High-Stakes Legal Battle
In March–April 2025, Petrofac went to court to finalize its restructuring plan.
On **20 May 2025**, the High Court of England and Wales sanctioned Petrofac’s restructuring plan, unlocking **US$355 million** in new funding and reducing a large chunk of its debt.
However, only weeks later, in **July 2025**, the Court of Appeal overturned part of this sanctioned plan after objections from certain creditors, leaving Petrofac’s recovery path fragile.
In its six-month business update (ending June 2025), Petrofac said it would **appeal to the Supreme Court** for the right to revisit the judgment.
5. TenneT Contract Cancellation: The Tipping Point
The turning point came in **October 2025**, when TenneT — the Dutch electricity grid operator — terminated Petrofac’s role in a **2 GW offshore wind transmission program**.
That contract cancellation was devastating: it represented **more than 80% of Petrofac’s expected engineering & construction revenue** for the near future.
With the restructuring plan now considered undeliverable in its current form, Petrofac’s board announced that it would apply to appoint administrators.
6. Entering Administration
In **late October 2025**, Petrofac’s directors formally filed for administration in the High Court of England and Wales.
Importantly, the administration was targeted at the **holding company** only — while its core operating arms were said to continue trading.
The group cited continued dialogue with creditors, and said it would explore “alternative restructuring and M&A solutions” — even as administrators work with management to preserve value.
The Offshore Wind Contract Cancellation – The Final Trigger
7. Wider Impact: Jobs, Projects, and Gulf Exposure
The administration risked over **2,000 jobs in Scotland**, particularly at Petrofac’s North Sea operations.
In the UAE, Petrofac laid off around **180 employees** after the TenneT contract cancellation.
Despite these layoffs, Petrofac stated that its **UAE projects remain “on track”**, with ongoing delivery for several major EPC contracts.
Petrofac’s exposure in the Middle East was significant: according to Gulf News, the company had nearly **US$5.8 billion** in live projects in the MENA region at the time of collapse.
8. Strategic Missteps & Governance Failures
Petrofac’s reliance on a few large contracts was a core weakness. Losing TenneT’s offshore wind work exposed how concentrated its E&C revenue was.
The corruption scandal was more than a reputation issue — it triggered costly compliance, legal, and operational setbacks. Internal control weaknesses were identified by Petrofac itself.
On the financial front, the restructuring plan depended heavily on creditor support, court sanction, and flawless execution. When the appeal interrupted this, Petrofac lacked fallback options.
9. Implications for the Gulf and Global Energy Sector
Petrofac’s collapse sends shockwaves through the EPC market in the Gulf. Clients such as ADNOC (Abu Dhabi), PDO (Oman), and others may re-evaluate risk, guarantees, and contract structures.
Rival EPC contractors like **Saipem**, **Technip Energies**, **Larsen & Toubro (L&T)**, and **Samsung Engineering** are expected to benefit from the void left by Petrofac’s retreat.
For governments and project owners, the case underscores the importance of governance, diversified contractor risk, and careful financial structuring — especially in long-term, capital-intensive energy projects.
10. Key Lessons
- Transparency matters: Corruption can destroy a company’s future, even after profits.
- Don’t bet everything on one giant contract: Over-dependency is a strategic risk.
- Debt restructuring is fragile: Legal, operational, and reputational risks can derail even well-planned restructuring.
- Cultural risk is real: Ethical failures and weak controls can erode trust with clients and creditors.
- Governance for big projects: Clients and states should demand stronger guarantees and risk-sharing structures.
The Offshore Wind Contract Cancellation – The Final Trigger
Final Thoughts
The fall of Petrofac is more than a business failure. It's a deeply instructive story about how ethical lapses, over-leveraging, and strategic miscalculations can topple even giants. As the energy world increasingly embraces renewables and large infrastructure projects, Petrofac’s collapse will likely be studied for years — not just in boardrooms, but in board exams for future energy leaders.
The Gulf region, in particular, should take note: future contractors will be judged not only on technical ability, but also on governance, financial strength, and long-term risk management. Petrofac’s story is a wake-up call — one that the entire industry must heed.
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