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Petrofac problems could impact Middle East projects

4 July 2025

Analysis
Wil Crisp
Oil & gas reporter

Disgruntled creditors are causing major problems for UK-based Petrofac, delaying progress on the company’s planned restructuring and increasing uncertainty over its operations, including projects in the Middle East region.

An appeals court in the UK has upheld an appeal against Petrofac’s restructuring plans, despite them being approved by the High Court of England and Wales less than two months ago.

Ahead of the appeal hearing, industry sources told MEED that making rapid progress on the company’s restructuring would be dependent on the appeals process being decided in Petrofac’s favour.

The ruling against Petrofac is a major stumbling block for the restructuring plans, and may have significant consequences for its ability to execute work across the Middle East and North Africa (Mena) region, where it is working on projects worth billions of dollars. Petrofac previously said that its restructuring plan would unlock $355m in new funding for its operations.

Petrofac is actively working on projects in the UAE and Algeria. Projects in the UAE include an engineering, procurement and construction management services (EPCM) contract awarded by Adnoc Gas last month.

The contract is worth $1.2bn and is focused on developing a gas liquefaction facility on Das Island.

It also has a $615m contract from Adnoc Gas to develop a carbon capture, utilisation and storage (CCUS) facility in the Habshan area. This contract was awarded in October 2023.

Petrofac’s projects in the UAE also include a $700m Adnoc Gas contract for a project to develop a new compressor plant at the Habshan gas processing complex.

This contract was awarded to Petrofac in June 2023.

Petrofac was awarded another contract by Adnoc Gas in January of this year worth $335m.

This project is focused on upgrading the sales gas pipeline network at the Habshan gas processing complex.

In Algeria, Petrofac is working on a $1.5bn contract that was awarded by the national oil and gas company Sonatrach in partnership with France’s TotalEnergies.

The contract was awarded in May 2023 to Petrofac in consortium with China Huanqiu Contracting & Engineering Corporation (HQCEC).

It is focused on developing a propane dehydrogenation polypropylene (PDH) plant in the Industrial Zone of Arzew.

Petrofac is also working on a project worth $300m in Algeria in partnership with Genie Civil et Batiment (GCB), an Algeria-based subsidiary of Sonatrach.

This contract was awarded by Sonatrach in August 2022 and is focused on developing the Tinrhert Gas Field.

Ongoing problems

The appeal against Petrofac’s planned restructuring was brought by Italy’s Saipem and South Korea’s Samsung E&A in connection with Petrofac’s participation in the $4bn Thai Oil clean fuels project.

Petrofac was awarded the engineering, procurement, construction and commissioning (EPCC) contract for Bangkok-based Thai Oil’s project in 2018, in consortium with Italy’s Saipem and South Korea’s Samsung Engineering.

Under the terms of the contract, the existing oil refinery in Thailand’s Sriracha region was due to be significantly upgraded.

The facility upgrade scope included improving the environmental performance and the quality of the transportation fuels produced and boosting the refinery’s production capability by 45% to 400,000 barrels a day (b/d).

In documents released by Petrofac in December last year, it said that the project experienced “significant cost overruns”, which drove losses at the company’s engineering and construction (E&C) division as well as at a group level over several years.

In December, Petrofac said that the impact of the Covid-19 pandemic, “together with the scale and unique complexity of the project and its location”, meant that significant additional work and costs were necessary to recover lost time and complete the project.

It also said that it had been in “protracted discussions since 2022 to recover costs incurred”.

In December, Petrofac stated its intention to seek agreed terms to continue its participation in the project “on a defined and limited basis”.

It said that without an agreement on terms the company would exit the Thai Oil Clean Fuels contract “with associated potential claims and contingent liabilities expected to be compromised as part of the Restructuring Plans”.

Petrofac said that it saw the restructuring as a way to “protect the Group from future exposure on the Thai Oil Clean Fuels contract”, but now that the appeal against the restructuring has been upheld, it seems like the group remains exposed.

Still winning

While the financial problems and losses have continued to plague Petrofac, the company has continued to win contracts in the Mena region, showing that its partners remain confident that the issues will not impact its performance.

Aside from the $1.2bn contract that Adnoc Gas awarded the company last month, in May Petrofac submitted the lowest bid for the Kuwaiti oil project focused on the installation of a separation gathering centre (SGC) known as SGC-2.

It submitted a price of KD422.45m ($1.37bn).

Additionally, in November, Petrofac announced winning a contract from Bapco Upstream to provide services to increase the productivity of the Bahrain Field.

The duration of the contract is two years and the scope of work on the contract covers the delivery of well hook-ups, associated pipelines and tie-ins for several new wells at the Bahrain Field, also known as the Awali field.

Ongoing uncertainty

If Petrofac had successfully negotiated the Court of Appeal and drawn a line under the problematic Thai Oil project, this would have removed a lot of uncertainty about the company’s future.

The appellants’ success means that Petrofac’s restructuring will be a much more drawn-out process, something that is likely to concern both shareholders as well as stakeholders in Petrofac projects across the Mena region.

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Wil Crisp

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