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Competition concerns in UK for oil and gas engineering services merger

Staff Writer |
The CMA has found that the Wood Group’s purchase of Amec Foster Wheeler gives rise to competition concerns.

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The Competition and Markets Authority (CMA) has been investigating the planned merger of the 2 companies which supply engineering services to the UK’s Upstream Offshore oil and gas sector.

At the end of its initial investigation, the CMA has found that the merger could lead to competition concerns in the supply of engineering and construction (E&C) services and operation and maintenance (O&M) services on the UK continental shelf.

This is because the companies currently compete closely with each other, and are 2 of the main suppliers of these services; the merger will reduce the number of major players currently active in these markets from 4 to 3; there are concerns that competition from other suppliers may not be sufficient to mitigate competition worries; and other suppliers seeking to enter the market or expand their UK presence may face significant barriers to doing so.

The Wood Group announced at the start of the CMA’s initial investigation that it intended to offer proposals to resolve competition concerns, should any be found.

Therefore, the case team looking at the merger has (without prejudice to the outcome of the investigation) worked constructively with the 2 companies involved to shape proposed remedies and provide guidance on whether these would be suitable to address possible competition issues.

The Wood Group has until 9 August 2017 to formalise its final remedies proposal.

If it does not formally submit a remedies proposal, or if the remedies offered do not sufficiently address the competition concerns that the CMA has identified, the merger will be referred for an in-depth ‘phase 2’ investigation.

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