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Petrofac, one of Aberdeen’s largest employers has entered administration. A statement released by the company on 27 October stated: Having carefully assessed its options, and the impact of TenneT’s decision to terminate Petrofac’s scope of work on the 2GW programme in the Netherlands, the Directors of Petrofac Limited (the Group’s ultimate holding company) have applied to the High Court of England and Wales to appoint administrators to Petrofac Limited. This is a targeted administration of the Group’s ultimate holding company only. And it went on to say: The Group’s operations will continue to trade, and options for alternative Restructuring and M&A solutions are being actively explored with its key creditors, including the Ad Hoc Group of Noteholders, who are supporting the Group with continued forbearance arrangements whilst alternative options are explored. The Group also retains the support of its RCF and Term Loan lenders who continue to extend maturities on a rolling basis. 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 trade union Unite which represents hundreds of workers at the offshore contractor, Petrofac, is demanding that all parties including the government work together to ensure a stable long-term future for the company’s workforce. The union states that Petrofac’s UK business is a profitable company with a highly skilled workforce and plenty of work in the pipeline. Unite has been told that prospective buyers are already lining up to take it over. Workers have also received short-term guarantees regarding pay. Unite general secretary Sharon Graham said: “There is no reason why the UK branch of Petrofac should not carry on successfully under new ownership without any negative impact on jobs and that is what I expect to happen. “Of course, our members have concerns when the company which owns their employer falls into administration and Unite will be monitoring all ongoing developments extremely closely. “It is now essential that everyone works together to ensure a successful transition and a stable long-term future for the company’s workforce.” TenneT state that : “In March 2023 TenneT signed a framework cooperation agreement with Hitachi Energy/Petrofac for six 2GW projects out of the total of fourteen 2GW grid connection systems that TenneT will realize via the 2GW Program. “Since 2024 Petrofac has been working on a financial restructuring of its business. In the past period TenneT has worked extensively with the Petrofac/Hitachi Energy consortium on mitigation measures. Since Petrofac has not been able to meet its contractual obligations, TenneT has exercised its right to partial termination of the contract related to the Petrofac scope. At the same time, a solution has been put in place involving a consortium of Hitachi Energy and a replacement contractor. “Hitachi Energy and the replacement contractor will be responsible for the project portfolio of the Dutch offshore grid connections IJmuiden Ver Alpha, Nederwiek 1, Nederwiek 3, Doordewind 1, Doordewind 2 and the German offshore grid connection LanWin5. “TenneT’s leading objective -shared by the new consortium- is to meet its legal and societal tasks and deliver the offshore grid connection projects as outlined in the Development Framework in the Netherlands and Netzentwicklungsplan in Germany. In doing so, TenneT is committed to keeping pace in the role out of the North Sea offshore wind agenda. ” Angry Scenes in the Commons After the announcement by Petrofac, Andrew Bowie the Conservative MP, who represents the West Aberdeenshire and Kincardine Constituency, asked an urgent question in the House of Commons calling on the Secretary of State for Energy Security and Net Zero, Michael Shanks, to make a statement on the future of the North Sea oil and gas industry. Michael Shanks said that Petrofac Ltd’s restructuring plan had failed after the Dutch company TennetT terminated their contract with the company. He continued: “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. Indeed, only last month Petrofac’s UK arm extended two significant contracts, demonstrating that the business has a viable future. “Today’s announcement [27 October] covers only the top-level holding company Petrofac Ltd, which has no employees. The Petrofac group has faced long-standing challenges, including a high-profile £77 million financial penalty imposed in 2021 following a Serious Fraud Office investigation into bribery.” The Minister stated that the North Sea ” will be at the heart of Britain’s energy future. For decades its workers, business and communities have helped to power our country and our world, and they will do so for decades to come.” There was an angry exchange in the Commons with Labour’s Scottish MPs coming in to defend the UK Government’s response. An angry Stephen Flynn, SNP, Aberdeen South said: “May I convey in the strongest possible terms to the junior Minister the anger and anxiety that is felt by my constituents in Aberdeen? “Right now they are providing energy security to each and every one of us on these isles, as well as revenue to his Treasury, yet their only reward, and the only certainty they seem to have on this Government’s watch, is that of looming job losses. “May I ask him to come to Aberdeen and explain to my constituents when he is going to listen to the trade unions, the academics, the workers and the industry and protect that industry, not only for our energy security but for Scotland’s economy?” Kirsty Blackman, SNP represents the Aberdeen North Constituency. She too was angry at the responses from the Minister and asked him: “Does he have any idea how it feels to be in Aberdeen just now, with another hammer blow coming? “And it is because of the Government’s policies; it is because there is this massive gap. “Skilled workers in the oil and gas industry will just go abroad; they will go elsewhere. It does not matter whether we retrain them; the jobs are not there for them right now. “What is he going to do to plug that gap? What will he do to keep these skilled workers in Scotland, in Aberdeen and in these islands, and not drive them away?” Michael Shanks claimed that the jobs were protected, “today 2,000 workers are waking up and doing the same job they were doing last week.” The Minister claimed that the Labour Government’s clean energy jobs plan would see that “over 400,000 more good jobs are to be created across the UK, including 40,000 in Scotland, by the end of the decade”. The impact of the latest blow to Aberdeen will be felt not just with those employed directly by Petrofac but across the whole supply chain throughout the UK. Fiona Grahame
