China largest oil operator in the North Sea with £2bn of tax breaks

The China National Offshore Corporation (CNOOC) has become the North Sea's biggest oil operator, and could be in line for up to £2bn ($2.6bn) of UK tax breaks. CNOOC subsidiary, Nexen, extracts around 200,000 barrels a day, more than 10% of the total. Former Chancellor George Osborne's 10% tax cut for oil operations is responsible for the company's lower tax bill. Approval of the Hinkley Point C nuclear reactor project has been delayed amid concern over Chinese control of critical infrastructure.

China has become the biggest oil operator in the North Sea, with a state-owned company said to be in line for £2billion of tax breaks.

China National Offshore Corporation (CNOOC) runs two of the biggest oilfields in the area.

One of its subsidiaries, Nexen, is responsible for extracting around 200,000 barrels a day - more than 10 per cent of the total.

The state-owned Chinese company is now the biggest operator in the North Sea

The scale of China's involvement - highlighted by The Times - will intensify fears over the state's role in the controversial Hinkley Point nuclear power plant project.

Theresa May put the the crucial infrastructure scheme on hold pending a review last month after becoming Prime Minister.

One of Mrs May's top aides previously criticised the extent to which David Cameron and George Osborne courted Chinese investment since 2010.

CNOOC was blocked from buying a US oil company over national security concerns a decade ago.

But no concerns appear to have been raised in Britain when the company bought Nexen, a Canadian oil operator with a large stake in North Sea oil, in 2012.

Cnooc's annual report for last year says UK government tax cuts for oil production were 'mainly' responsible for the difference between a tax charge of £2.5 billion in 2014 and a tax credit of £361 million a year later, according to The Times.

As Chancellor, Mr Osborne cut the overall tax bill for oil operations from 50 to 40 per cent.

'Our income tax credit changed 114 per cent', the report states, '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 Continued on page 6, col 5 North Sea deal gives Beijing £2bn tax break Continued from page 1 deferred tax liability.'

Two of the North Sea's biggest oilfields are run by the state-backed Chinese company

Alongside its interests in key North Sea infrastructure, China is poised to play a central role in a new nuclear plant

Lower oil prices also helped to drive down CNOOC's income tax bill to minus 18.2 per cent.

Other North Sea oil companies can access the tax cuts.

The accounts apparently reflect the total value of the tax cuts in the future, and CNOOC will not receive the full benefit this year.

Jeffrey Henderson, professor of international development at Bristol University, told the newspaper: '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 CNOOC's involvement in the North Sea may be an attempt by China to increase its corporate 'soft power'.

He added: 'It may be part of a general strategy to boost the credibility and legitimacy of Chinese companies operating within Europe.'