Why Petrofac collapsed and what it means for Gulf energy projects

Dubai: Petrofac’s collapse into administration was not a sudden blow so much as the final break in a long period of strain. The holding company filed for court-appointed administrators after the termination of a key Dutch offshore wind contract erased any remaining runway for its restructuring plan. The company insists day-to-day operations continue and that only the holding entity is affected. Investors, lenders and governments are now watching what comes next for thousands of employees and for clients across the Middle East that are running multi-billion-dollar gas and infrastructure programmes with Petrofac in the supply chain.

The immediate trigger came from the Netherlands. In late October, grid operator TenneT terminated Petrofac’s scope on a flagship two-gigawatt offshore wind transmission programme. The contract represented more than 80% of revenue in Petrofac’s engineering and construction division, according to court filings. Losing it removed a central pillar of forward work and abruptly collapsed the company’s near-final restructuring plan.

Petrofac disputes TenneT’s justification, but commercial reality moved faster than legal argument. Lenders assessing a compromise suddenly lost confidence in the company’s ability to deliver. With no viable alternative capital structure, directors sought protection in the High Court and applied to appoint administrators. Trading for now continues across global subsidiaries, though the parent company has been delisted from the London Stock Exchange.

The roots of the crisis run deeper. Petrofac’s downward slide began in 2021 when it pleaded guilty to seven failures to prevent bribery on historic Middle East contracts. The fines totalled about £77 million. The reputational hit damaged relationships with lenders and clients and raised compliance costs. That coincided with tight project cash flows and inflation in labour and materials across both hydrocarbons and renewables.

A court-supervised restructuring that began in 2023 was meant to stabilise the business by adding new funding and deferring debt service. The plan secured High Court approval in May 2025, only for the Court of Appeal to overturn it in July after objections from joint-venture partners. That left Petrofac with a fragile capital structure that depended on flawless execution and creditor patience. The TenneT termination removed both.

The Gulf region is one of Petrofac’s most important theatres of work. The company has been a major contractor to national oil and gas operators in the UAE and Oman, delivering engineering, procurement and construction services for gas compression, wellhead facilities, and brownfield upgrades. In 2025 alone, it secured awards from ADNOC Gas tied to the Rich Gas Development programme, Das Island gas expansions and new compressor capacity at Habshan.

According to MEED Projects data, Petrofac has about $5.8 billion of active projects in the Middle East and North Africa. The UAE accounts for roughly $2.9 billion, including a $1.2 billion scope for the planned Das Island gas liquefaction facility and a $700 million package for the sales gas pipeline network upgrade. Across the region, the company has bids under evaluation worth more than $19 billion.

The worry is not about project cancellation in the Gulf. State-backed energy spending remains robust and contractors can be replaced. The risk lies in timing. If administrators struggle to secure liquidity for operating subsidiaries, or if suppliers hesitate to ship long-lead equipment, schedules could tighten. Energy projects are increasingly interlinked. Compressor modules, control systems and rotating equipment often have long fabrication cycles. A break in one chain can ripple across commissioning programmes.

“Petrofac’s situation is unfortunate, but the energy market is far bigger to be hit by any single contractor,” said a regional analyst. “Abu Dhabi’s projects are structured to stay on schedule, and even when global contractors face turbulence, UAE projects continue without interruption.”

Clients are already running contingency plans. These typically include checking parent company guarantees, reviewing step-in and novation rights, and preparing to shift residual scope to joint-venture partners or other EPC players already pre-qualified. In the GCC, local champions and global firms have active frameworks with ADNOC, PDO and Aramco. That makes step-ins more practical than in other regions.

Owners will also look at procurement pipelines. If key equipment is already purchased and fabrication is underway, they may ring-fence these items and transfer installation scopes. If not, they may prefer rapid retendering. Credit signals from administrators and major lenders in the weeks ahead will influence how quickly project owners act.

Petrofac’s situation may also shift commercial dynamics. Low-margin, lump-sum EPC models were already under strain from inflation and supply chain volatility. Clients could lean more toward reimbursable contracts for complex interface work, while insisting on tighter progress-based payments. Contractors will ask for clearer change mechanisms and escalation clauses that reflect input cost risk.

Petrofac’s collapse is not a comment on GCC energy economics. The region has deep capital buffers, long-cycle development plans and multiple capable contractors. It is, however, a reminder that execution risk is now strategic. As national oil companies expand gas capacity, accelerate decarbonisation programmes and invest in hydrogen and CCUS infrastructure, project delivery will compete with global supply chains and scarce engineering talent.

Petrofac’s fall follows years of stress, legal constraints and operational shocks. Yet its operating units still hold expertise, and administrators’ early statements suggest a focus on preserving value. “Petrofac has a number of fundamentally strong businesses and we are focused on delivering the best possible outcome for them through this process,” the company said. “Our long-established North Sea business continues to operate as normal, and management are working to minimise disruption for clients and employees.”