Petrofac collapse: 7 warning signs the global energy industry missed

Dubai: Petrofac’s collapse has become more than a company crisis — it’s a stress test for how the global energy industry manages risk. What failed in the UK could soon confront supply chains across the Gulf and beyond.

Sapna Amlani, Supply Chain Lead at Moody’s, noted how Petrofac’s failure “exposed deep structural vulnerabilities in its business and the energy supply chain.” She calls it “a true test for supply chain resilience” — one that has put more than 2,000 Scottish jobs, critical offshore operations, and duty holder contracts at risk.

Her assessment points to a broader truth: the warning signs were visible, yet the industry failed to respond.

1. One collapse can hit a whole region

Petrofac’s deep presence in northern Scotland made local economies heavily dependent on its operations. When projects stopped, thousands of jobs and vital offshore services were immediately affected.

Amlani explains that “in northern Scotland, where Petrofac’s footprint was significant, the risk was compounded by geographic concentration. A single point of failure—whether contractual, financial, geopolitical, or reputational—can destabilize entire regional networks.”

The same vulnerability exists in the Gulf, where national energy companies rely on a few large contractors to execute billion-dollar projects.

Warning sign? Overdependence on a single player turns local disruption into regional instability.

2. Smaller suppliers are often the weakest link

Behind every major contractor sits a network of smaller firms that keep projects moving. Amlani says these “Tier 2 and Tier 3 suppliers, often invisible in boardroom discussions, now represent a potential blind spot in risk oversight.”

Many of these companies operate with limited cash flow and minimal cyber safeguards. When they struggle, the impact can quickly rise through the supply chain, threatening business continuity and compliance.

Warning sign? Overlooking the financial and digital health of smaller suppliers leaves entire operations exposed.

3. Contract design can make or break a business

Petrofac’s collapse followed the termination of a major offshore wind contract with TenneT — a moment Amlani calls one that “underscores the fragility of contractor ecosystems that underpin the UK’s energy infrastructure.”

Fixed-price contracts left no flexibility for inflation, supply delays, or changing project conditions. That single loss set off a chain reaction of liquidity stress, credit downgrades, and lost investor confidence.

Warning sign? Rigid contracts without clear risk buffers can turn a single setback into a full-scale financial crisis.

4. Energy transition isn’t risk-free

Petrofac’s downfall proves that renewable projects face the same weaknesses as fossil fuel ones. As Amlani warns, “the Petrofac crisis is a stark reminder: resilience must be engineered, not assumed.”

Green energy projects still rely on the same financing models, global contractors, and supply partners now showing signs of strain.

Warning sign? Assuming clean energy projects are safer masks the same structural risks that have always existed in the industry.

5. Financial stress often builds up quietly

Petrofac’s reputation gave a false sense of stability while financial stress was building underneath. Liquidity problems grew until credit tightened and costs surged.

Amlani says the episode should “prompt reassessment of supplier fragility, dependency mapping, and risk transfer mechanisms across the energy sector.” Standard financial indicators often fail to detect these warning signs until it’s too late.

Warning sign? Relying on reputation and outdated financial metrics hides real-time liquidity pressures.

6. Cybersecurity Is the next supply chain threat

Financial fragility isn’t the only concern. Amlani warns that smaller suppliers’ “cyber vulnerabilities can cascade upward, potentially affecting business continuity and compliance.”

Many still lack basic cybersecurity systems or crisis response plans. As energy operations become more digital, a single breach could disrupt entire networks.

Warning sign? Ignoring cyber weaknesses within supplier ecosystems risks large-scale operational disruption.

7. Resilience has to be built in at the start

Resilience has often times been treated as a recovery plan rather than a design principle. Amlani says the Petrofac collapse should trigger a “reassessment of supplier fragility, dependency mapping, and risk transfer mechanisms.”

Her takeaway is clear: “Risk leaders must now ask—how exposed are we to the next domino falling?” Companies need to build resilience into their systems through scenario planning, supply chain mapping, and diversified partnerships.

Warning sign? Waiting for failure before acting ensures it will happen again.

Bottom line?

Petrofac’s collapse wasn’t sudden — it was the result of ignored warnings.

Amlani captures the lesson clearly: “As the UK accelerates its energy transition, the Petrofac crisis is a stark reminder: resilience must be engineered, not assumed.”

The same vulnerabilities stretch across global energy supply chains.
The question now is whether the next warning signs will be spotted — or missed again.