A California firm has resumed selling drilling equipment to China, ending a year's lull in Peking purchases of U.S. oil equipment and stimulating hopes of a surge in sales to the booming Chinese petroleum industry.
Robert Hughes, an executive of Smith International, Inc. who returned from a trip to Peking and the huge Chinese oil field at Taching last week said the Chinese have begun to purchase again from several of the company's product lines. Other industry sources say the ice-breaking deal involves $2 million in equipment, principally drill bits, but Hughes declined to discuss specifies.
"People in the past who bragged or published the deals they made with the Chinese found themselves cut off." Hughes said in a telephone interview from the company headquarters in Newport Beach, Calif. The American oil industry has welcomed with keen anticipation a tour of us. Petroleum centers by a Chinese oil industry team now in the United States.
"They requested we arrange the [WORD ILLEGIBLE] on an urgent basis," said Ray [WORD ILLEGIBLE] president of the Baker Trading Co. of Houston, who helped the National Council for U.S. - China trade set up the tour.
Hughes, who said he also plans to see the Chines team during its visit said he and other Smith International executives had discussed sales of more equipment during their trip to China. They briefed Chinese officials on new U.S. drilling technology, touring Taching for four days and also discussed buying more Chinese ore for manufacture of some of the company's mining tools. Hughes and Pace said U.S. oilmen hope the tour by the Chinese team would lead to resumption of major U.S. oil equipment sales to China. The Chinese had bought an estimated total of $80 to $90 million in U.S. equipment before political struggles over the succession to Mao Tse-Tung and foreign exchange problems cut off such sales last year.
Communist Party chairman Hua Kuo-Feng announced two months ago a crash program to build ten more oilfields as big as Taching." He said wanted to fuel an economic program to make China a major industrial power by the year 2000.
Last year's interruption in oil equipment purchases has been blamed in part on a faction of dogmatic Maoists in Peking, including Mao Tse-Tung's wife, Chiang Ching. They labelled equipment imports as "worshipping foreign things" during their campaign to seize power from more pragmatic Communist Party vetrans.
Hua arrested Chiang and the other dogmatists in October. Since then the Chinese media have argued that purchase of foreign equipment and technology was sanctioned by Mao before his death in September. American businessmen were encouraged by a big jump in Chinese purchases of U.S. goods other than petroleum equipment at this spring's Canton trade fair. Despite little success in persuading Washington to agree to full diplomatic relations, the Chinese still increased their purchases of U.S. goods from only $500,000 in spring of 1976 to $20 million this year.
In the past few months the Chinese have also ordered trucks from the International Harvester Co., apparently to be used in oil field operations, and purchased a large offshore oil rig from a shipping firm based here.
The official New China News Agency has reported that China's crude oil production was 10 per cent higher in May than in the same period last year. Although Taching accounts for perhaps 40 per cent of China's estimated 84 million metric tons of oil produced last year, extensive drilling and exploration is proceeding in Szechwan, Chianghai and several other places. A communist source here revealed recently that the Chinese have also begun explorations in the South China Sea. off Twangtung Province south of here.
Western experts have argued that the Chinese must quickly accelerate their sale of oil abroad, particularly to customers like Japan, in order to obtain enough foreign exchange for purchases of foreign drilling equipment.
A study by Randall W. Hardy of the U.S. Federal Energy Administration said pipelines and rigs to push production to 200 million tons by 1980 would cost China as much as $4 billion but Peking would need to export more than four times its current 8 millions tons of oil a year to earn enough foreign exchange for such purchases.