Will Brazil block the Subsea7–Saipem merger as oil majors sound alarm on competition?

Why are major oil companies asking Brazil’s Cade to intervene in the Subsea7–Saipem merger and what is at stake?

The proposed merger between Subsea7 and Saipem, two of the world’s most prominent offshore engineering and construction contractors, has come under sharp scrutiny in Brazil. According to reporting from Reuters, oil majors including Exxon Mobil Corporation (NYSE: XOM), state-controlled Petroleo Brasileiro S.A. (Petrobras, BVMF: PETR4), and rival contractor TechnipFMC plc (NYSE: FTI) have petitioned Brazil’s Administrative Council for Economic Defense (Cade) to intervene. Their filings allege that the combination would dangerously concentrate the market for subsea services, especially in subsea umbilicals, risers, and flowlines (SURF), which are critical components in deepwater oil and gas projects.

Brazil is a global epicenter for offshore oil development, particularly in the pre-salt fields where subsea engineering plays a decisive role in cost competitiveness. The challenge raised by these oil companies signals that the merger, if left unchecked, could alter the balance of power in one of the industry’s most lucrative markets. By pushing Cade to either block the deal or impose remedies, the petitioners are highlighting how consolidation in offshore services could affect project economics and long-term investment flows.

How significant is the planned Subsea7–Saipem merger and what financial scale will it create?

The Subsea7–Saipem deal, announced earlier this year, aims to create a combined entity tentatively referred to as Saipem7. The two companies together would control a massive backlog of orders estimated at €43 billion, generate annual revenues approaching €21 billion, and deliver more than €2 billion in EBITDA. Industry watchers note that this scale would make the merged firm one of the largest integrated offshore contractors in the world, rivaling only TechnipFMC in size and scope.

The deal is expected to close in the second half of 2026, subject to regulatory approvals across multiple jurisdictions. Italy has already given a conditional green light, requiring Saipem to retain certain operations domestically and prioritize Italian industrial capacity. However, Brazil is a different story. Cade has historically taken a firm stance in protecting competition in sectors ranging from aviation to food processing, and the stakes in oil and gas services are arguably higher given the sector’s importance to the national economy.

Why are Exxon Mobil, Petrobras, and TechnipFMC opposing the transaction in Brazil?

The filings to Cade from Exxon Mobil, Petrobras, and TechnipFMC present overlapping but distinct concerns. Exxon Mobil warned that the consolidation of Subsea7 and Saipem would reduce the number of qualified global contractors capable of executing large-scale subsea projects. With fewer players to bid for contracts, clients like Exxon risk facing higher costs, less favorable terms, and diminished bargaining power.

Petrobras, as Brazil’s dominant operator in deepwater fields, underscored that its strategic reliance on subsea contractors makes competition a necessity. In its submission, Petrobras argued that the merger could limit supplier options, raise project costs, and potentially delay the execution of national energy priorities. Given Petrobras’ central role in Brazil’s upstream development, its stance carries significant weight with Cade.

TechnipFMC, a direct rival to both Subsea7 and Saipem, made the case that the merger would tilt the competitive landscape against all remaining players. The company’s argument centered on the fact that Subsea7 and Saipem have historically been aggressive bidders, and their combination would narrow the field to essentially two global giants—TechnipFMC and Saipem7—leaving smaller engineering houses with little chance of competing on equal terms.

How does Brazil’s antitrust authority typically approach deals of this scale?

Cade has earned a reputation as a sophisticated regulator that weighs both national interest and market dynamics. In the past, it has not hesitated to impose structural remedies such as divestitures or behavioral commitments when mergers threaten to reduce competition. The regulator is also known to take cues from international peers while tailoring conditions to Brazil’s unique market structure.

In this case, Cade will likely evaluate the level of concentration in the subsea contracting market, the potential for price increases, and the risk of excluding smaller players. Remedies could include forced divestment of certain assets, guarantees of open supplier access, or restrictions on bundling services. While a full block is possible, industry experts suggest Cade will lean toward imposing conditions that maintain competitive tension without derailing foreign investment altogether.

What broader implications does this deal hold for the global subsea oil and gas sector?

The subsea services sector is notoriously capital intensive, with high barriers to entry. A combined Subsea7–Saipem would command scale advantages in technology, fleet size, engineering expertise, and global reach. Such advantages could make it difficult for smaller or regional contractors to compete, potentially cementing an oligopolistic market structure.

For oil producers, this dynamic could lead to higher service costs and reduced flexibility in tendering contracts. For investors, however, the prospect of cost synergies and financial stability in a cyclical industry could be attractive. The tension between clients who want more competition and shareholders who want higher margins encapsulates the complexity of this merger.

How is investor sentiment shaping up around Subsea7, Saipem, and their rivals?

Institutional sentiment around the deal is mixed. On one hand, the financial community recognizes the potential for scale, operational efficiency, and improved pricing power once the merger is complete. On the other hand, regulatory challenges in Brazil, coupled with earlier conditional approval in Italy, suggest that the final structure of the deal may be very different from the original announcement.

For Subsea7 and Saipem, prolonged regulatory uncertainty could pressure share prices in the near term, as investors discount the risk of delays or forced divestments. Rival firms like TechnipFMC could see temporary upside if regulatory authorities side with clients and constrain the merger’s scope, thereby preserving competition. Petrobras, which trades actively on the B3 exchange, may benefit strategically if Cade imposes conditions that safeguard its ability to negotiate competitive terms for subsea services.

What are the possible outcomes from Cade’s review process and how might they reshape the merger?

There are several scenarios in play. The first is a full approval, which seems unlikely given the level of opposition from both clients and rivals. The second is approval with remedies, which could involve asset divestitures in Brazil or commitments not to bundle key services. This scenario is seen as the most probable, as it allows Cade to maintain competition while still permitting the merger to move forward.

A third scenario is outright rejection. If Cade blocks the deal, the merged company would lose access to one of the largest deepwater markets in the world, which could undermine the financial rationale of the entire transaction. Such a move would also send a powerful signal to global regulators that emerging economies are prepared to take a tougher stance on international consolidations that affect strategic sectors.

What expert perspectives reveal about Cade’s likely approach to the Subsea7–Saipem merger in Brazil

Industry analysts quoted by Reuters suggested that the opposition mounted by Exxon Mobil, Petrobras, and TechnipFMC is a calculated attempt to shape the regulatory outcome early. By intervening at the pre-approval stage, they are signaling to Cade that the risks to competition are too significant to ignore. This strategy is consistent with how large oil companies often use antitrust processes to influence supplier consolidation in their favor.

From an expert perspective, Cade’s decision will likely rest on how convincingly it can balance Brazil’s need for competitive subsea services with the appeal of allowing global giants to achieve the scale needed for complex offshore projects. The regulator may also consider the geopolitical and industrial policy dimensions, particularly as Brazil positions itself as a leader in deepwater energy development.

In the end, whether Cade imposes structural remedies or goes as far as blocking the deal, the case underscores the growing importance of antitrust oversight in the energy services sector. As oil companies push for competitive supplier bases and contractors seek financial stability through mergers, regulators like Cade are becoming pivotal actors in shaping the industry’s future.