Australia’s competition watchdog believes the planned global merger of oilfield services companies Halliburton and Baker Hughes could give the combined group, and current market leader Schlumberger, too much power.
Australia’s competition watchdog believes the planned global merger of oilfield services companies Halliburton and Baker Hughes could give the combined group, and current market leader Schlumberger, too much power.
The Australian Competition and Consumer Commission said these companies were often described as the ‘big three’ in oilfield services.
“The ACCC’s preliminary view is that the proposed acquisition is likely to raise competition concerns in a number of markets for the supply of oilfield goods and services,” chairman Rod Sims said.
“The ACCC is concerned that the acquisition would result in the merged entity being one of only a small number of suppliers that could service the relevant markets.
“The ACCC is particularly concerned in relation to the supply of complex or high-risk projects, such as offshore drilling projects.
“The ACCC also considers that the proposed acquisition may create conditions that would facilitate coordinated behaviour in the market.”
Mr Sims said the ‘big three’ had significant competitive advantages as they benefited from extensive product ranges, economies of scale and scope, large R&D budgets and significant industry experience.
In a statement of issues, the ACCC added: “There are strong risks of unilateral and coordinated effects arising from the proposed acquisition”.
“The advantages the merged firm and Schlumberger would have suggest that post-acquisition they are not likely to face strong competitive constraints from rivals or entrants in a number of markets.”
Schlumberger, which has its Australian head office in Perth, is considered the largest global and Australian provider of oilfield services.
The ACCC said Halliburton generated in excess of $US400 million in revenue from its Australian operations in the 2014 calendar year – out of global revenue of $US32 billion.
Baker Hughes’ 2014 Australian revenue was in excess of $US300 million, from $US24 billion globally.
The two companies announced a global merger in November last year, and since then the deal has been subject to review by competition regulators including in the US, the European Union, India and China.
The two companies have agreed to divest various operations to try and head off the regulatory concerns.
The ACCC said it was assessing whether the fourth largest service provider, Weatherford, could expand its operations in Australia.
“The ACCC understands Weatherford has a less extensive offering in Australia than it does in other jurisdictions,” it said in the statement of issues.
“Weatherford may be able to expand its offering post-acquisition if the merged firm exercised market power.”
The ACCC is also considering whether other multinational services providers currently present in Australia, such as GE Oil & Gas, National Oilwell Varco or Superior Energy Services, present a credible threat of entry into markets affected by the acquisition.
“The ACCC’s preliminary view is that this is unlikely,” it said.
“These companies have limited offerings relative to the merger parties, meaning extensive entry would be required.”
The ACCC is inviting further submissions before making a final decision in December.
