UAE's ADNOC Terminates $1.65B Deal with Petrofac

UAE's national oil company ADNOC has terminated $1.65B worth of contracts with UK oilfield services firm Petrofac.

The two contracts were awarded in February, and entailed the delivery by Petrofac of offshore platforms and gas processing facilities for the Dalma Gas Development Project.

However, Petrofac on Thrusday said that it had received notice of termination from ADNOC for the recently awarded contracts for the Dalma Gas Development Project. 

"Petrofac is committed to working with ADNOC over the coming weeks to explore alternative options to deliver this project in a way that supports their strategic objectives within the current challenging environment," Petrofac said.

"Petrofac continues to progress execution of its remaining Group backlog of around US$7billion as planned and is still progressing with tendering for major contracts in Abu Dhabi. However, it anticipates this development may have an impact on the timing of their awards," It added.

The Dalma project has been described as a key part of the Ghasha ultra-sour gas concession which is central to ADNOC’s objective of enabling gas self-sufficiency for the UAE.

Petrofac earlier in April confirmed it was planning staff reductions and furloughing as part of its action to save cash in response to low oil prices and COVID-19 pandemic.

The oilfield services firm said it would reduce overhead and project support costs by at least US$100m in 2020 and by up to US$200 million in 2021, and conserve cash and liquidity by reducing capex by 40% and suspending the 2019 final dividend.

The company said it would reduce personnel by c.20% and furlough staff in anticipation of a reduction in activity levels.

At the end of 2019, Petrofac had 11500 employees. The 20 percent reduction means around 2300 people will be laid off.

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