Petrofac deal scrapped as HMRC drops challenge to save 2,000 North Sea jobs

More than 2,000 North Sea jobs have been protected after HM Revenue & Customs agreed not to pursue legal action against a restructuring deal involving Petrofac, which paves the way for the sale of its UK business to US engineering firm CB&I.

The decision removes a major obstacle that threatened to destroy work and push Petrofac’s North Sea operations into failure, with potentially dire consequences for workers, supply chains and energy infrastructure.

HMRC had been seeking to recover more than £150 million from Petrofac in connection with a long-running tax dispute, and argued that the proposed debt restructuring was unfair because it would leave the tax authorities with only £3 million, while other creditors stood to receive the bulk of their claims.

However, the Scottish Court of Session dismissed HMRC’s challenge earlier this month, and the tax authority has confirmed it will not appeal the decision. The move effectively paves the way for the finalization of a bailout deal, which is contingent on massive debt relief across the group.

Petrofac has warned that without an immediate solution, its UK asset solutions division, which employs around 2,250 people and operates around 20 North Sea platforms, is at risk of bankruptcy and collapse.

Such an outcome is likely to trigger emergency measures to retain operations overseas, which may lead to business disruption and significant job losses.

The company, once under the FTSE 100, employs around 8,000 people worldwide and has been under pressure in recent years, facing a combination of legal issues, project delays and financial difficulties.

The asset solutions division continued to trade after Petrofac went into administration in October, and an agreement was reached in December to sell the business to CB&I.

The job is seen as an effective way to maintain employment and employment, while providing a stable long-term owner of the business.

Petrofac said it is now focused on completing the sale “as quickly as possible”, describing CB&I as a “very good fit” that provides a positive outcome for the company and its employees.

In his judgement, Lord Sandison criticized HMRC’s handling of the case, highlighting delays in pursuing the tax claim, which stemmed from allegations of avoidance between 1999 and 2014, allegations Petrofac denies.

The judge noted that the debt was not formally assessed until 2020 and is not scheduled for trial until 2025, describing the pace of enforcement as “very leisurely”.

He concluded that HMRC’s position in 2026 was caused “at least in part by its ineffectiveness” in relation to restructuring, suggesting that the dispute could have been resolved earlier.

The settlement underscores the delicate balance between creditors’ rights and the need to preserve viable businesses and operations in complex restructurings.

For the UK energy sector, the result is very important. Petrofac’s North Sea operations play a key role in maintaining offshore infrastructure, and a disruption would have wide-ranging implications for production and supply.

The case also highlights the challenges facing companies in the oil and gas services industry, which has been navigating a difficult period marked by regulatory scrutiny, changing energy policies and financial pressures.

With the legal uncertainty cleared, attention will turn to completing the sale and stabilizing operations under new ownership.

For employees and stakeholders, the decision represents relief after months of uncertainty. For Petrofac, it marks an important step in its restructuring process.

And for policy makers and regulators, the case serves as a reminder of the importance of timely intervention, and the potential consequences when conflicts drag on important economic sectors.