North Sea Explorers Face Buy-Out from the East


"Chinese and Middle Eastern sovereign wealth funds are circling struggling North Sea energy explorers in expectation of a fire sale next year."

The sovereign wealth invasion of the North Sea has already started, with Abu Dhabi National Energy Company subsidiary TAQA Bratani paying $631 million for five Shell oilfields in the North Sea earlier this month. This was part of a much wider swoop for Western assets by the wealth funds of oil-rich countries in recent years, with targets including infrastructure and banking.

The biggest Middle Eastern fund is thought to be the Abu Dhabi Investment Authority, worth an estimated $875 billion, followed by the various Saudi funds and the Kuwait Investment Authority. China's main fund is the China Investment Corporation.

Discussions in oil industry circles in the northeast have increasingly turned to the plight of the AIM-listed small explorers in recent weeks as the credit crisis lurches towards the new year.

With the banks already under pressure to tighten lending, the fall in the oil price will mean companies are considerably less creditworthy than before and will risk seeing their facilities scaled back accordingly. Those who cannot pay the difference will face asset seizures and liquidation.

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