China’s North Sea oil investments pose ‘very real risk to our security’, MPs warn
A number of senior MPs have called on the government to review China’s role in the North Sea oil and gas sector, arguing Chinese-backed investments in Britain’s energy resources pose a “very real risk to security”.
Former conservative leader Iain Duncan Smith told City PM that Downing Street needed to “expunge Chinese involvement in key strategic industries” including oil and gas production.
Duncan Smith, who chairs the Inter-Parliamentary Alliance on China (IPAC), a cross-party international policy group focused on UK-China relations, slammed the government for “failing to take seriously” Chinese involvement in the domestic energy sector.
He said: “We have been calling on the government to carry out a full inventory of Chinese involvement in our strategic industries. They have simply failed to do so.”
Once the inventory was completed, the MP urged the government to remove stakes owned by Chinese companies in the North Sea.
The UK’s oil and gas industry is currently the source of nearly half the UK’s fossil fuel supplies, which has been essential for keeping homes heated this winter as the UK has sought to avoid massive energy crunches after Russia cut supplies to Europe.
Alicia Kearns, chair of the Foreign Affairs Select Committee and China Research Group (CRG), warned that China’s “growing dominance in many key energy sectors poses a very real risk to our security.”
“[China’s] growing dominance in many key energy sectors poses a very real risk to our security.”
Alicia Kearns, chair of the Foreign Affairs Select Committee
The Conservative MP labelled the government’s approach to Chinese investment in strategic assets as “fundamentally inconsistent.”
She compared the lack of action in the North Sea with the recent push to get rid of China General Nuclear Power Group’s (CGN) 20 per cent stake in Sizewell C, where the government bought out the Chinese company’s share in November.
Kearns told City PM: “It’s plainly counterproductive to remove Chinese state involvement in our nuclear energy sector with one hand if we continue to wave through dangerous dependence in the oil and gas sector with the other.”
Concerns have been raised across the political spectrum, including by Labour MP and BEIS Committee chair Darren Jones.
He urged the government to follow through on its energy policies with meaningful action, noting that energy has been defined as a critical supply chain in the National Security and Investment Act.
“Ministers should now undertake and publish supply chain resilience reviews and take a position on what level of ownership is deemed an unacceptable risk,” Jones told City PM.
Chinese investments in the North Sea
A number of Chinese companies – which are backed by the country’s government – have made significant investments in the North Sea’s oil and gas sector.
Much of this was achieved in the past decade or so amid a flurry of investment activity when the government was courting Chinese investment under previous administrations.
China National Offshore Oil Corporation, or CNOOC, has stakes in multiple North Sea oil fields including one of the UK’s highest producers Buzzard.
It has a 44 per cent share in the site, which produces up to 80,000 barrels of oil equivalent per day
CNOOC has further stakes in Golden Eagle, and the combined platform which oversees the Scott, Telford and Rochelle fields.
It is also an active player in the UK’s industry with membership at industry body Offshore Energy UK.
While it is difficult to calculate specifically, CNOOC previously boasted of contributing more than 25 per cent of the UK’s oil production, and 10 per cent of the country’s energy needs.
Meanwhile, Neptune Energy, one of the UK’s largest and most established producers operating in the North Sea, is 49 per cent owned by China Investment Corporation.
Repsol Sinopec – a joint venture between Spanish energy giant Repsol and Chinese state-backed Sinopec – has interests in 48 fields on the UK continental shelf – including 38 it operates – alongside 11 offshore installations.
Oil and gas producers CNOOC, Neptune Energy, and Repsol Sinopec have been approached for comment.
UK trade association Offshore Energies UK (OEUK) told City PM the industry does not determine the rules for controlling North Sea assets.
A spokesperson said: “The government has long had a policy of promoting foreign direct investment and open markets and this has many benefits for boosting UK industry and jobs.”
“But, as recent events show, investment from overseas does also bring increased exposure to geopolitical trends and events. It is for the government to assess these issues and review the rules as they see fit,” the spokesperson said.
Alongside the Chinese-owned assets, the UK exports considerable amounts of oil to the country.
In the second quarter of 2022, it was the second biggest export to China after cars according to ONS data.
Government lacks North Sea security strategy to deal with China
While the government has challenged a number of Chinese investments in recent months, it has not outlined any approach to Chinese investments in the North Sea.
This is despite stating that domestic exploration and development of oil and gas is crucial to the country’s energy security, as the UK looks to reduce its reliance on overseas energy suppliers.
The North Sea industry has routinely criticised the unveiling of windfall taxes amid soaring oil and gas prices.
It has also pushed for further development and exploration on the continental shelf on the basis that domestically secured oil and gas is cheaper, less carbon intensive and more secure than relying on overseas vendors.
As it stands, the current licensing round for more projects in the North Sea does not include any specific criteria for assessing Chinese investments on the grounds of national security.
Bids are expected to conclude next week with announcements on new licenses expected in later this year, overseen by the North Sea Transition Authority (NSTA).
When approached for comment, the Government argued that it was well-placed to protect strategic assets in the licensing round.
A BEIS department spokesperson said: “As with any industry, protecting our national security is always of paramount importance, and the NSTA has strict processes in place for issuing North Sea oil and gas licenses.
“The National Security and Investment regime also enables us to continue championing business and open investment, whilst protecting national security.”
The NSTA declined to comment..