Petrofac the lowest bidder for Kuwaiti project as it files for bankruptcy

Troubled UK energy services group Petrofac has emerged as the front-runner for a major infrastructure contract in Kuwait, just as its parent company files for administration in the UK.

While the London-listed holding company succumbs to financial pressures, its operational arm in the Middle East submitted the lowest commercial offer for Kuwait Oil Co.’s (KOC) substantial Water Injection Plant-IV (WIP IV) project.

Petrofac’s bid of KWD453.7mn ($1.47bn) positioned it ahead of the only other competitor, India’s Larsen & Toubro, which tabled an offer of KWD488.3mn ($1.5bn).

The tender, aimed at significantly boosting water injection capacity in South Kuwait, saw a dramatic drop-off in participation. Although seven international contractors were originally qualified for the work, only Petrofac and L&T ultimately submitted proposals.

The project’s extensive scope includes a new water injection facility, associated pipelines, oil gathering systems, and new well pads. Petrofac’s aggressive bid underscores the critical need for its operating entities to secure new cash flow while the holding company collapses.

That collapse was formalised when Petrofac applied to the High Court of England and Wales to appoint administrators. The immediate trigger was the termination of a major offshore wind contract by Dutch grid operator TenneT, which cited Petrofac’s failure to meet contractual obligations.

Petrofac management stressed that the administration applies only to the group’s holding company and that its operating entities, which employ roughly 7,300 people globally, will continue to trade with the support of key creditors.

This event is the culmination of a near-decade-long crisis for the once FTSE 100 constituent. The firm has been hobbled by high debt, pandemic-era shutdowns, and the severe reputational and financial fallout from a 2021 UK Serious Fraud Office (SFO) probe.

That investigation ended in a $95mn fine for failing to prevent bribery related to historic contract awards in the Middle East.

The company’s financial distress accelerated this year, leading to its shares being suspended from the London Stock Exchange in May after it failed to publish its 2024 results, by which time its market value had evaporated to just $\pounds20$mn.

The UK’s Department for Energy Security and Net Zero stated the administration was a “product of long-standing issues in their global business,” but affirmed the UK arm “is continuing to operate as normal.”