More than 2,000 North Sea jobs have been secured after HM Revenue & Customs agreed not to take further legal action against a restructuring agreement with Petrofac, clearing the way for the sale of its UK business to US engineering firm CB&I.
The decision removes a major obstacle that threatened to derail the deal and push Petrofac’s North Sea operations into insolvency, with potentially serious consequences for workers, supply chains and energy infrastructure.
HMRC had sought to reclaim more than £150m from Petrofac in connection with a long-running tax dispute and had argued that the proposed debt restructuring was unfair because it would leave the tax authority with just £3m while other creditors would be able to reclaim a larger proportion of their claims.
However, the Scottish Court of Session rejected HMRC’s challenge earlier this month and the tax authority has now confirmed it will not appeal the decision. The move effectively paves the way for the conclusion of the rescue deal, which is dependent on significant debt relief across the group.
Petrofac had warned that without a quick solution, its UK asset solutions division, which employs around 2,250 people and operates around 20 North Sea platforms, risks running out of money and collapsing.
Such an outcome would likely have triggered emergency measures to maintain offshore operations, potentially resulting in business dissolution and significant job losses.
The company, once a member of the FTSE 100, employs around 8,000 people worldwide and has been under sustained pressure in recent years as it contends with a combination of legal issues, project delays and financial strain.
The Asset Solutions division had continued trading after Petrofac entered administration in October, and a deal to sell the business to CB&I was agreed in December.
The transaction is seen as a viable path to maintaining operations and employment while creating a stable long-term owner for the company.
Petrofac said it was now focused on completing the sale “as quickly as possible”, describing CB&I as an “excellent addition” that offered a positive outcome for both the company and its workforce.
In his judgment, Lord Sandison criticized HMRC’s handling of the case, citing delays in pursuing the tax claim due to alleged avoidance issues between 1999 and 2014, which Petrofac denies.
The judge noted that liability was only formally assessed in 2020 and the court’s decision was not due until 2025, describing the pace of enforcement as “very leisurely.”
He concluded that HMRC’s position in 2026 was due “at least as much to its own inaction” as to the restructuring itself, suggesting the dispute could have been resolved much sooner.
The resolution of the case highlights the delicate balance between creditors’ rights and the need to maintain viable businesses and jobs during complex restructurings.
The result is particularly significant for the UK energy sector. Petrofac’s North Sea operations play a critical role in maintaining offshore infrastructure and disruptions could have had wider impacts on production and supply chains.
The case also highlights the challenges faced by companies in the oil and gas services industry, which is experiencing a difficult period characterized by regulatory scrutiny, changing energy policies and financial pressures.
Now that the legal uncertainty has been resolved, attention will focus on completing the sale and stabilizing operations under new ownership.
For workers and stakeholders, the decision represents a reprieve after months of uncertainty. For Petrofac, this is a crucial step in its restructuring process.
And for policymakers and regulators, the case is a reminder of the importance of timely intervention and the potential consequences if disputes in critical economic sectors drag on.
