Af ter Hinkley deal row, China tightens its grip on North Sea oil

CHINA has become the biggest crude oil operator in the North Sea, despite growing security concerns about its true intentions

In a remarkable example of the expansion of Beijing’s ‘soft power’ empire, it emerged that a Chinese state-controlled oil company now runs two of the biggest oilfields in the region.

China National Offshore Oil Corporation (CNOOC) has moved to dominate British oil production despite the fall in oil prices – fuelling concerns about its motivation. The Chinese stake in the region ballooned to the extent that Britain handed over £2billion in tax breaks last year, according to a Times investigation. Nexen, a CNOOC-owned company, is now responsible for extracting almost 200,000 barrels a day in the area – which amounts to more than 10 per cent of output. The company is controlled by the Communist Party in Beijing.

Alarmingly, in 2012, CNOOC’s then boss, Wang Yilin, said ‘large scale deep-water rigs’ were China’s ‘mobile national territory and a strategic weapon’.

His comments were made years after the company was forced to withdraw a billionpound takeover bid for a US energy firm after politicians said the deal could threaten national security.

Raffaello Pantucci, China expert at the Royal United Services Institute, said there had been ‘security concerns about letting a state-owned firm buy a piece of national infrastructure’. Mr Pantucci downplayed any suggestion that China could be in the North Sea for sinister reasons.

One expert said he was puzzled as to why China would want to invest in the North Sea as oil prices fell.

Jeffrey Henderson, professor of international development at Bristol University, said: ‘North Sea oilfields are running down and becoming increasingly expensive for oil producers.

‘In narrow terms, the state overseas oil company will be pouring money into the region for no particularly obvious gain.’ He suggested its involvement in the North Sea could be an attempt by China to increase its corporate ‘soft power’: ‘It may be part of a general strategy to boost the credibility and legitimacy of Chinese companies operating within Europe.’

Security experts have already raised concerns about China’s interest in Britain’s energy infrastructure.

Last month it was revealed that Britain’s Chinese partner in the £18billion Hinkley Point nuclear power station deal was facing nuclear espionage charges in the US. China General Nuclear Power (CGNC), was accused of trying to steal nuclear research secrets. The revelations increased fears for the future of the scheme and further calls were made for Theresa May to intervene and scrap the deal.

The Prime Minister has already delayed a decision on the project amid national security fears.

The allegations raised the prospect that China could build a nuclear power plant in Britain using technology stolen from the Americans.

Former Chancellor George Osborne gave tax breaks for oil companies in the North Sea. In 2014, the tax charge was £2.5billion for the year.

However, according to CNOOC’s annual report for last year, in 2015 there was a tax credit of £361 million.

Although CNOOC will not receive the full benefit of the £2billion break this year, it said in its report: ‘Our income tax credit changed 114 per cent mainly because the UK government decreased the combined income tax rate on North Sea oil and gas activities from 62 per cent to 50 per cent [which] resulted in a one-time reversal of deferred tax liability.’

THIS paper welcomes foreign investment in the UK. But shouldn’t everyone have qualms over the revelation that China, working surreptitiously through stakes in Canadian companies, has become the biggest crude oil operator in the North Sea?

After nuclear power, HS2 and Thames Water, this is just the latest strategically vital industry on which the Chinese have set their sights – slavishly courted by former Chancellor George Osborne, despite their appalling record of industrial espionage and human rights abuses.

The US has set up a high-level Committee on Foreign Investment, specifically to examine the national economic and security implications of overseas involvement in the United States. Shouldn’t Britain follow suit without delay?