More than 2,000 North Sea jobs have been safeguarded after HM Revenue & Customs agreed not to pursue further legal action against a restructuring deal involving Petrofac, clearing the way for the sale of its UK business to US engineering firm CB&I.
The decision removes a major obstacle that had threatened to derail the transaction and push Petrofac’s North Sea operations into insolvency, with potentially severe consequences for workers, supply chains and energy infrastructure.
HMRC had been seeking to recover more than £150 million from Petrofac relating to a long-running tax dispute, and had argued that the proposed debt restructuring was unfair because it would leave the tax authority with just £3 million, while other creditors stood to recover a greater proportion of their claims.
However, Scotland’s Court of Session rejected HMRC’s challenge earlier this month, and the tax authority has now confirmed it will not appeal that ruling. The move effectively clears the path for completion of the rescue deal, which is contingent on significant debt write-offs across the group.
Petrofac had warned that without swift resolution, its UK asset solutions division, which employs around 2,250 people and operates approximately 20 North Sea platforms, was at risk of running out of cash and collapsing.
Such an outcome would likely have triggered emergency contingency measures to maintain offshore operations, potentially leading to a break-up of the business and significant job losses.
The company, once a FTSE 100 constituent, employs around 8,000 people globally and has been under sustained pressure in recent years, grappling 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 was agreed in December to sell the business to CB&I.
The transaction is seen as a viable route to preserve operations and employment, while providing a stable long-term owner for the business.
Petrofac said it is now focused on completing the sale “as soon as possible”, describing CB&I as “an excellent fit” that offers a positive outcome for both the company and its workforce.
In his judgment, Lord Sandison criticised HMRC’s handling of the case, highlighting delays in pursuing the tax claim, which dates back to alleged avoidance issues between 1999 and 2014, allegations Petrofac denies.
The judge noted that the liability was not formally assessed until 2020 and was not scheduled for tribunal determination 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 earlier.
The resolution of the case underscores the delicate balance between creditor rights and the need to preserve viable businesses and jobs in complex restructurings.
For the UK’s energy sector, the outcome is particularly significant. Petrofac’s North Sea operations play a critical role in maintaining offshore infrastructure, and disruption could have had wider implications for production and supply chains.
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, shifting energy policies and financial pressures.
With the legal uncertainty now removed, attention will turn to finalising the sale and stabilising operations under new ownership.
For workers and stakeholders, the decision represents a reprieve after months of uncertainty. For Petrofac, it marks a crucial step in its restructuring process.
And for policymakers and regulators, the case serves as a reminder of the importance of timely intervention, and the potential consequences when disputes drag on in critical sectors of the economy.
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North Sea jobs safeguarded as HMRC drops challenge to Petrofac rescue deal