EU Commission launches in-depth investigation of Halliburton-Baker Hughes merger

The European Commission has opened what it says is an in-depth investigation to assess whether the proposed acquisition of oilfield service supplier Baker Hughes by rival Halliburton would impede effective competition, in breach of the EU Merger Regulation.

Commissioner Margrethe Vestager, in charge of competition policy, said: “The Commission has to look closely at this proposed takeover to make sure that it would not reduce choice or push up prices for oil and gas exploration and production services in the EU. Efficient exploration and production of oil and gas resources within the EU form an important element of our Energy Union strategy in terms of ensuring security of supply.”

The takeover would bring together the world’s second and third largest oilfield service suppliers, thus eliminating one of the three current main global competitors (i.e. Halliburton, Baker Hughes and market leader Schlumberger). The opening of an in-depth inquiry does not prejudge the final result of the investigation, the EC said.. The Commission now has 90 working days, until 26 May 2016, to take a final decision.

Oilfield service markets are characterised by high technological and financial barriers to entry, leading to a market with only four globally active competitors with extensive portfolios: Halliburton, Baker Hughes, Schlumberger and to a lesser extent Weatherford, the EC said.

The Commission’s preliminary investigation indicated serious potential competition concerns in more than 30 product and service lines, both offshore and onshore. In particular, the investigation revealed that Halliburton and Baker Hughes seem to be close competitors, both in terms of tenders and in innovation.

Halliburton and Baker Hughes noted the announcement by the European Commission, saying this decision is a normal step in the Commission’s review process, and the views expressed by the Commission at this stage are preliminary only.

“Although the Commission was kept informed of the remedies that Halliburton has proposed to the U.S. Department of Justice, Halliburton did not offer remedies during Phase I, as it believes that offering remedies during Phase II will facilitate a more efficient review. Halliburton expects to offer a substantial remedies package that it believes will address any substantive competition concerns,” Halliburton said in a statement.

To date, the transaction has received regulatory clearances in Canada, Colombia, Ecuador, Kazakhstan, South Africa and Turkey.

Offshore Energy Today staff