Global engineering giant Petrofac has been banned from competing for new projects in the UAE after the company’s former global head of sales David Lufkin pleaded guilty to three counts of bribery in January for contracts worth $3.3 billion in the UAE between 2012 and 2018.
Lufkin pleaded guilty to offering and making or planning to make total payments of approximately $30 million to influence the award of an engineering, procurement, and construction (EPC) contract in 2013 for the Upper Zakum UZ750 Field Development Project, in addition to a variation to that contract in 2014, and a FEED contract in 2014 for the Bab Integrated Facilities Project.
“Business integrity and ethical conduct are at the core of ADNOC’s values, and we remain committed to maintaining the highest standards of ethics and compliance across all of our commercial relationships,” a spokesperson for ADNOC said. “Given the [Serious Fraud Office]’s ongoing investigations, ADNOC Group can no longer maintain its current engagement with Petrofac.”
Petrofac wrote in a press statement that it would continue to execute work on two EPC projects for ADNOC that are already under construction. It also claimed that “ADNOC has stated that it recognises the long-standing nature of its relationship with Petrofac and has confirmed that its decision will be reviewed on a periodic basis.”
The London-listed company saw its share price slide more than 8% after the news was revealed. Approximately 10% of Petrofac’s contract revenue came from the UAE in 2019, and the nation was its third largest market at that time, after Oman (25%) and Kuwait (15%).
The former executive had already pleaded guilty to 11 bribery charges brought forth by Britain’s Serious Fraud Office (SFO) relating to projects in Iraq and Saudi Arabia in February 2019. Those charges concerned contracts in Iraq worth more than $730 million and contracts in Saudi Arabia worth more than $3.5 billion.
These charges by the SFO include payments of $2.2 million “by Petrofac to two agents in respect of a $329.7 million EPC contract on the Badra oilfield in Iraq.” The Badra Phase One EPC contract was awarded to Petrofac in February 2012. The SFO also noted further offers of payment to influence contract variations and the extension of a related operations and maintenance (O&M) contract; Petrofac did not obtain either of the contracts and payments were not made.
Payments regarding the Fao Terminal project in Iraq were also included among the SFO’s charges, which noted that $4 million in payment were made by Petrofac with regards to an O&M contract, which was awarded to the company in August 2012 and extended in 2013, 2014 and 2015. SFO estimates that this was worth around $400 million to Petrofac.
In Saudi Arabia, charges involve three downstream projects. The SFO lists the EPC contract for Petro Rabigh Phase II Petrochemical Expansion Project, worth approximately $463 million, for which the SFO says “payments of approximately $5.8 million were ultimately made by Petrofac to its agent.”
Regarding the Jazan Refinery and Terminal Project EPC contracts, worth an estimated $1.7 billion, which were awarded to Petrofac in December 2012, Petrofac made payments of approximately $21.4 million to its agent.
Petrofac also paid approximately $19.5 million to its agent in respect to the EPC contract for a sulphur recovery plant as part of the Fadhili Gas Plant Project, which was awarded in November 2015 and is worth an estimated $1.56 billion.
The SFO noted that its investigation into Petrofac and its activities is ongoing.
