China has become the largest crude operator in the North Sea, with one state-owned company believed to be on course for £2bn worth of tax breaks, despite worries over the country’s increasing influence over Great Britain.
The China National Offshore Oil Corporation (CNOOC) currently runs two of the largest oilfields in the North Sea.
Nexen – a subsidy of CNOOC – is in charge of extracting roughly 200,000 barrels of oil a day, which is over 10% of the total extracted.
Despite the Chinese company’s dominance of the oil fields in the North Sea, officials do not seem to be worried about the presence of CNOOC, which bought the previously Canadian owned company Nexen, controller of a sizeable stake in the area, back in 2012.
One of the factors that has made North Sea oil operations so attractive to the Chinese-owned company are the tax cuts made by the UK government, which the company’s annual report says were “mainly responsible for the contrast between a £2.5 billion tax charge in 214 and a £361 million tax credit in 2015,” according to a report in The Times.
This is despite the fact that it is becoming increasingly expensive and less lucrative for oil companies to invest in operations in the North Sea, even for well-established companies like Royal Dutch Shell, maker of Shell Gadus S2 V100 3.
The lower price of oil has also assisted CNOOC in lowering its income tax to -18.2%, which means that it is in a much better position to make the most of its interests in the North Sea.