CMA fears a merger could increase UK oil and gas costs

North Sea Oil Platforms

North Sea Oil Platforms Credit: NAC CC

The UK Competition and Market Authority, the CMA fears a merger could increase UK oil and gas costs as with less competition production costs could rise.

Well intervention services are essential services used by oil and gas operators to manage well production, provide well diagnostics and modify a well’s state or configuration.

Two of three of the largest companies, Baker Hughes and Altus supply various well intervention services in the UK, including to operators active on the UK continental shelf.

An investigation by the CMA has found that Baker Hughes and Altus are the two largest providers of both coiled tubing and pumping services in the UK and compete very closely in the supply of these services currently.

After any merger, Baker Hughes would face competition from only one other major supplier – Halliburton – and a small number of other suppliers that are much weaker competitors in the UK.

The CMA is therefore concerned that the loss of rivalry between the merging companies could lead to higher prices, reduced choice and lower quality services for businesses in the UK that purchase coiled tubing and pumping services.

Colin Raftery, Senior Director of Mergers at the CMA, said: “Well intervention services are an integral part of managing oil and gas wells. Competition is vital to avoid higher prices or poorer quality of services for oil and gas operators active in the UK.

“Our investigation showed that Baker Hughes’ purchase of Altus would take out an important supplier and few remaining competitors would be left in the market. We will move to an in-depth investigation unless the companies can address our concerns.”

The two parties are now required to submit mitigation to the CMA explaining why the takeover should not be examined more thoroughly.

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