The UK's Competition and Markets Authority (CMA) has announced that it is considering undertakings offered by oilfield services giant Schlumberger (SLB) which could potentially resolve competition concerns identified during its Phase 1 investigation into SLB's acquisition of ChampionX. The CMA is now entering a 40-working-day period to scrutinize these proposed remedies and seek feedback from third parties before reaching a final decision.

SLB, a leading global supplier of oilfield services, equipment, and related technologies, announced its intention to acquire ChampionX, a global provider of chemical solutions, oilfield services, and equipment, earlier this year. Both companies have significant operations in the UK and assets in the North Sea, supplying crucial inputs to oil and gas companies and other oilfield service firms.

Following its initial Phase 1 investigation, the CMA raised concerns that the merger, if allowed to proceed without remedies, could significantly reduce competition in several key markets within the UK's oil and gas industry. Specifically, the CMA highlighted potential issues in the supply of production chemicals used in the UK North Sea, the provision of directional drilling services utilizing rotary steerable systems (RSS), and the supply of permanent downhole gauges (PDGs). The authority worried that the acquisition could cement the companies' already substantial positions in concentrated markets, potentially leading to increased costs, fewer choices for customers, and stifled innovation.

To address these concerns, SLB has offered a package of undertakings to the CMA.

• The divestiture of SLB’s UK production chemical technologies (PCTs) business to a buyer approved by the CMA. PCTs are vital for optimizing the performance, safety, and efficiency of oil and gas operations by enhancing production rates and preventing issues like corrosion.

• The sale of ChampionX’s global US Synthetic business to a CMA-approved buyer. US Synthetic is a leading supplier of polycrystalline diamond (PCD) bearings, a critical component used in certain directional drilling services offered by SLB’s competitors in the UK North Sea. These bearings are particularly well-suited for the harsh operating conditions prevalent in the region.

• The granting of a license covering relevant intellectual property and know-how to a CMA-approved alternative developer of quartz sensors and transducers. These components are essential for the growth of a strong alternative supplier in this segment. Additionally, the undertakings include agreements to provide SLB’s rival suppliers of permanent downhole gauges (PDGs) in the UK with access to ChampionX’s market-leading quartz sensors and transducers for an interim period. Quartz sensors, incorporated into transducers, are typically used within PDGs for high-value offshore assets and are known for their robustness and accuracy in challenging downhole environments. PDGs provide continuous, real-time monitoring of downhole conditions, aiding in optimizing production and ensuring operational safety and efficiency.

Sorcha O’Carroll, Senior Director for Mergers at the CMA, emphasized the importance of competition in the oil and gas sector, stating, "Effective competition in the oil and gas industry drives innovation, pushing companies to reduce costs and develop more efficient ways to produce energy. It also helps ensure that prices remain competitive, benefiting consumers whilst allowing companies to meet global energy demands."

She added, "We are continuing to engage constructively with the companies on the proposals they have put forward to resolve our competition concerns. We’ll also consider any feedback we receive on these undertakings before reaching a final decision."

The CMA will now undertake a detailed assessment of the proposed undertakings, including seeking feedback from industry stakeholders and other interested parties. If the CMA concludes that these remedies adequately address the identified competition concerns, it will proceed to clear the deal, subject to the final acceptance of the undertakings. Failure to find the undertakings sufficient could lead to a more in-depth Phase 2 investigation of the merger.