A proposed merger between Italy’s engineering, drilling, and construction services giant Saipem and the Luxembourg-domiciled Subsea7 is facing deeper scrutiny in the European Union (EU) over offshore market concentration due to subsea umbilicals, risers, and flowlines (SURF) and carbon capture and storage (CCS) market dominance, potentially threatening to undermine competition, raise costs, and curtail innovation.
The European Commission has opened an in-depth investigation under the EU Merger Regulation to assess the proposed merger between Saipem and Subsea7, which aims to give birth to Saipem7 as a combined company, over concerns that the proposed concentration may significantly impact effective competition in some offshore engineering and construction service markets.
This probe follows the European Commission’s preliminary findings that the merger would be largely complementary in some areas, including offshore wind projects and so-called conventional offshore projects; however, it appears that the business combination would further consolidate the SURF services market at this stage.
As the subsea infrastructure that connects offshore wells, often located thousands of meters below sea level, to production facilities above the surface, SURF comprises different types of pipes and cables, which are installed on, or near, the seabed.
These services are also used in CCS projects, which involve capturing carbon dioxide (CO2) emissions from industrial facilities and power plants, transporting the CO2 through pipes and permanently storing it in geological formations often deep beneath the seabed to prevent it from being released into the atmosphere.
The global SURF services market is perceived to already be highly concentrated, with Saipem and Subsea7 being two of the three market leaders with very few credible alternatives.
Focus on potential risks for competition, prices, and innovation
The European Commission’s preliminary investigation indicates that the transaction may significantly reduce competition on the already highly concentrated SURF services market for oil and gas and CCS projects. These findings underline that Saipem and Subsea7 are two of the three leading suppliers in the world, and the merged entity would have high market and capacity shares in these markets.
Given that Saipem and Subsea7 compete closely with each other, especially regarding the most complex and remunerative projects, the other possible rivals seem to be considerably smaller and limited in their ability to compete across the board, with only one comparable competitor remaining.
Since barriers to entry and expansion are very high in this capital-intensive industry, where spare capacity is limited, the Commission claims this is partly explained by the substantial investments linked to the highly sophisticated vessels needed, especially for the most complex projects.
While customers are in many cases sophisticated and large players notably active in the oil and gas sector, the European Commission points out that they may not be able to resist price increases in the absence of sufficient credible alternative suppliers.
“Consequently, the transaction may lead to the loss of significant competition in the market for SURF services, possibly with higher prices and reduced innovation as a result,” according to the Commission, which will examine whether the transaction may give rise to coordinated effects in these markets during its in-depth investigation.
Whether the transaction may lead to competition concerns in other, closely related markets will also be assessed, such as the markets for trunkline services, which involve the laying of larger export pipes, and for the decommissioning of obsolete subsea infrastructure that appears to require similar vessels and capabilities as their installation.
The European Commission, which will further investigate whether the transaction gives rise to anticompetitive vertical or conglomerate effects, will now undertake an in-depth investigation into the potential effects of the transaction to determine whether its initial competition concerns are confirmed.
Since the proposed transaction was notified on June 16, 2026, the Commission has 90 working days, until November 26, 2026, to make a decision, but is adamant that opening an in-depth investigation does not prejudge its outcome.
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