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36 min ago 2 min read
The European Commission has opened an investigation into the proposed merger between Saipem and Subsea7 and will consider if it may significantly impact competition in some offshore engineering and construction service markets.
The Commission has preliminarily found this merger to be largely complementary in some areas, including offshore wind projects and so-called conventional offshore projects.
But it is investigating if the consolidated subsea umbilicals, risers, and flowlines (Surf) services market “would significantly reduce competition for oil and gas and carbon capture and storage projects”. Surf is the subsea infrastructure that connects offshore wells, often located thousands of metres below sea level, to production facilities above the surface.
Italy-based Saipem and Subsea7, listed on the Oslo stock exchange and headquartered in Luxembourg, are two of three market leaders with very few credible alternatives and compete closely with each other, according to the Commission. Combined, they would have high market and capacity shares.
Spare capacity is limited, and barriers to entry and expansion are very high in this capital-intensive industry.
While customers are in many cases sophisticated, and large players notably active in the oil and gas sector, they may not be able to resist price increases in the absence of sufficient credible alternative suppliers.
Consequently, the transaction may lead to the loss of significant competition in the market for Surf services, possibly with higher prices and reduced innovation.
The Commission now has 90 working days, until 26 November, to make a decision.
