The Competition and Markets Authority (CMA) said an initial investigation found the merger "could lead to competition concerns in the supply of engineering and construction (E&C) services and operation and maintenance (O&M) services on the UK continental shelf".
The competition watchdog has now told Wood Group to provide a proposed remedy or face an in-depth investigation.
Kate Collyer, Deputy Chief Economic Adviser and the decision maker in this case, said: "We have consulted widely on the implications of this merger and it is clear that Wood Group and Amec Foster Wheeler have a particularly strong market position in the supply of key services to the Upstream Offshore oil and gas sector in the UK. The merger would, therefore, remove the rivalry between 2 of the 4 main suppliers of these services.
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"Based on our initial investigation, this could significantly reduce customers' ability to obtain competitive bids, which could lead to increased prices and affect the competitiveness of the oil and gas industry in the UK.
"The CMA's team will continue to work constructively with the Wood Group and Amec Foster Wheeler in the assessment of the remedies that they intend to formally offer to address these concerns. This merger will, however, warrant an in-depth investigation, unless the companies offer suitable proposals to address our concerns."
In a statement, Wood Group said the firm has been "working constructively" with the CMA to progress consideration of a remedy it put forward in May.
It said: "Wood Group will now formally submit the remedy proposal to the CMA.
"The CMA will provisionally decide whether this remedy proposal is sufficient by 16 August 2017 at the latest, with its final decision due by 11 October 2017. Both Wood Group and Amec Foster Wheeler consider that the proposed remedy is sufficient to address the CMA's competition concerns and to obtain clearance."
(LM/MH)
