PETROFAC has said it expects to record a further loss of around £130m on work on the Laggan-Tormore gas plant on Shetland citing a range of problems including bad weather and low labour productivity.

The news came after the oil services giant disclosed in February that it had lost around £150m in 2014 on the contract to build the terminal for Total. Petrofac said then it had taken robust action to address the challenges involved and expected to recognise no further profit or loss on the contract.

However, the Jersey-registered company stunned investors yesterday with news that its problems on the plant had deepened, sending shares plunging 10 per cent. It said work to complete the project by the third quarter will involve significantly more man-hours than expected.

The update makes clear the scale of the difficulties Petrofac has faced with the Laggan-Tormore plant, which is its first big onshore construction project in UK. The plant on Shetland will process gas from the giant Laggan and Tormore gas fields, which lie around 75 miles north west of the isles.

With operations run from the Middle East, Petrofac has found working in Shetland has involved a range of unfamiliar challenges.

Chief executive Ayman Asfari said: "Our lack of experience of operating a direct construction model in a wholly new geography for our Onshore Engineering & Construction (OEC) business, particularly in a location where labour costs are much higher and productivity much lower than we are used to, has cost us dearly."

The stormy weather conditions prevailing around the Shetlands have created big difficulties for Petrofac in the new geography.

The company yesterday highlighted continued adverse weather conditions during March on Shetland. In November, Petrofac said it had had 300 days of interruption on Laggan-Tormore because of high winds and poor weather.

Yesterday the company said work on the plant has been delayed by industrial action and low manpower productivity levels, without providing further details. It is understood the industrial action affected work on scaffolding and had knock on effects in other areas.

Petrofac faces tighter labour laws and higher degrees of unionisation working in the UK than it does in the Middle East and Africa.

Some 2,000 workers were employed on the Laggan-Tormore plant at the peak of construction work last year. The bulk came from the UK.

Petrofac said: "We have refreshed the site leadership team and further strengthened it with key members of our Sharjah-based OEC team and have changed a number of elements of our working practices to drive the project through to completion."

The company also complained that a sub-contractor had failed to deliver in line with their agreed scope, without elaborating.

With Petrofac expecting construction activity on the site to be substantially complete by mid-June, the company has started to learn lessons from the project.

Mr Asfari said: "We have already affirmed that we will no longer take construction risk on large lump-sum projects within the UK to avoid a similar experience to Laggan-Tormore moving forward."

There may be concerns that Petrofac's experience could dampen enthusiasm among oil and gas firms for operating off Shetland, seen as a major growth area for the UK industry.

Majors such as BP and Shell are investing heavily in developing giant fields such as Clair Ridge West of Shetland.

However, the price of oil has fallen dramatically since they committed to the projects and Total decided to go ahead with the £3.5bn Laggan-Tormore development.

Total has been an enthusiastic champion of the plan to develop the fields as a major new production hub. It is believed to be trying to sell a 20 per cent stake in Laggan-Tormore following the plunge in the oil price.

Petrofac has cut some jobs in response to moves by oil and gas firms to rein in activity in the North Sea.

It employs around 4,000 people in Scotland.

The company recently cut the rates paid to contractors by 20 per cent in total.

Shares In Petrofac closed down 101.5p at 912.5p.