Norway's Competition Regulator Questions Floatel-Prosafe Merger
On Monday, the Norwegian Competition Authority (NCA) announced that it may intervene in the proposed merger of offshore accommodations platform operators Floatel and Prosafe, the two closest competitors in their segment in the region. The agency says that other suppliers on the Norwegian continental shelf offer units that are not comparable and cannot meet the requirements to compete for all of the same contracts.
"Prosafe and Floatel are the only providers of newer semi-submersible housing platforms on the Norwegian continental shelf. The Norwegian Competition Authority is of the opinion that the parties are close competitors and that they face competition from other players to a limited extent," said Lars Sørgard, the agency's director of competition.
The firms have provided NCA with proposals on ways to mitigate any negative effects on competition, but the agency's preliminary assessment finds that these measures will not sufficiently address the problem.
"We fear that customers who request accommodation services on the Norwegian continental shelf will have few or no competing suppliers in upcoming tender contests following the merger. Reduced competition will increase costs for companies that demand offshore accommodation services," said deputy Marita Skjæveland.
The announcement does not represent a final decision. The firms have 15 workdays to comment and the authority has an additional 15 workdays to make a final decision, making October 18 the deadline for a formal outcome.
In a joint statement, Floatel and Prosafe said that they do not agree with the NCA and have already presented remedial measures that would ensure adequate capacity and competitive pricing on the Norwegian continental shelf. "While some of Norway’s most professional customers are positive, the measures have so far not been accepted by the NCA," the two firms said.
The UK's Competition and Markets Authority (CMA) has conducted a similar review and reached a similar preliminary conclusion. Prosafe and Floatel own the vast majority of semi–sub offshore accommodation units in northwest Europe, according to CMA, and together they have won the most contracts over time. "Aside from the merging businesses, there are limited alternatives available to customers at present," CMA determined. The agency plans to refer the case for a "phase 2" investigation of the merger's potential effects on the UK North Sea market. ?
Prosafe owns and operates a total of nine vessels, with options for two more within the next five years, and Floatel's fleet includes five units. Floatel and Prosafe announced their proposed merger in June, citing persistently challenging conditions in the offshore oil and gas market. "The need for consolidation in oil services is well known. We consider this transaction not only strategically sound, but also necessary to adapt to the significant changes in our markets and competitive landscape in recent years, said Glen Ole Rødland, chairman of Prosafe, in a statement issued June 3.