Italian energy contractor Saipem's merger with Norwegian peer Subsea 7 may lead to price hikes and less innovation, EU antitrust regulators warned on Wednesday as they opened a full-scale investigation.
The deal announced in February last year would create a leading global player in offshore energy services, from drilling and engineering to laying subsea infrastructure for offshore oil and gas projects. Both companies operate a fleet of vessels for these services.
The European Commission, which acts as the EU competition enforcer, said the deal may have a significant impact on competition in some offshore engineering and construction service markets, confirming a Reuters story.
It said the deal would reduce the number of players in the SURF services market where Saipem and Subsea7 are two of the three market leaders with few credible alternatives.
SURF (subsea umbilicals, risers, and flowlines) is the subsea infrastructure of pipes and cables installed on the seabed which connects offshore wells to production facilities above the surface. They are also used in carbon capture and storage projects.
"The transaction may lead to the loss of significant competition in the market for SURF services, possibly with higher prices and reduced innovation as a result," the Commission said in a statement.
Saipem and Subsea 7 did not immediately respond to emailed requests for comment.
The investigation will also look into the markets for trunkline services, which are the laying of larger export pipes and the decommissioning of obsolete subsea infrastructure.
The commission set a November 26 deadline for its decision on whether to clear the deal.
The companies could offer to reduce their capacity or sell some of their vessels to ease competition concerns, one source told Reuters earlier this month.
Saipem's customers include Saudi Aramco, QatarEnergy, Abu Dhabi's ADNOC and other national energy companies, while Subsea 7's customer base is more focused on international oil firms such as BP and Equinor.
(Reporting by Foo Yun Chee, editing by Inti Landauro, Kirsten Donovan)