After years of covetous glances and wary suggestion, china appears to have taken a major step toward purchasing American oil drilling equipment.
Ten Chinese petroleum equipment specialists arrived in the U.S. June 15 and toured 47 drilling equipment firms in the West and Southwest.
The experts are the first in the West and Southwest. The experts are the from the People's Republic of China to look seriously at the state of the art in the U.S. oil industry.
"The fact that [the delegation] has come is a strong indication that they're ready to buy," said William Clarke of the Commerce Department's Bureau of East-West Trade.
"U.S. oil technology is superior; we are the standard for the world," said Eric Kalkhurst of the National Council for U.S.-China Trade, sponsors of the delegation's visit.
Some oil technology can be purchased only here. Certain U.S.-made parts and support equipment already are in use in China, but U.S. companies have failed in the past to sell large drilling equipment.
The delegation, representing China's Petroleum & Natural Gas Exploration & Development and the National Machinery Import & Export corporations showed strongest interest in offshore drilling and seismic exploration equipment. They visited companies in Texas, Louisiana, Oklahoma, California, Washington and Alaska in response to a standing invitation extended by the U.S.-China Trade Council and its member oil equipment firms. The specialists left July 24 for a two-week tour of similar facilities in Japan.
"It was obvious that the delegation had done a great amount of reseach on the available equipment in the United States adn the companies concerned with this equipment," said Kalkhurst. "The Chinese want to technically evaluate a piece of equipment before they purchase it to ensure quality and applicability to their situation. They asked in advance to see seismic exploration equipment, both onshore and offshore, and drilling equipment."
The Washington, D.C.-based National Council for U.S.-China Trade, a non-profit organization with more than 400 corporate members, plans to send a delegation of U.S. equipment manufacturers to China in the fall to continue educating the Chinese in American oil technology.
The U.S. has sold $100 million worth of oil equipment to china since the resumption of trade in 1972, according to Commerce Department figures. Total U.S. exports to China in the first half of 1977 were $62.2 million. Exports in 1976 totaled $135.4 million, and an increase to $150 million is projected for this year.
The Chinese trade with the U.S. on a cash basis, and there have been no signs that they intend to change this policy. The lack of formal diplomatic recognition between the two countries and attendant absence of agreements on international law and recourse have precluded the kinds of flexible trade agreements China has made with other countries.
Since China began exporting crude oil in 1973, U.S. oil companies have expressed interest in bartering designs, machinery and technical assistance for crude oil. But the Chinese have refused to allow American and Japanese involvement in devolping their oil industry, whether through barter or other arrangements.
The Chinese are not the only party that objects to a barter arrangement. According to Kalkhurst, the composition of Chinese crude oil probably makes it unsuitable for barter with the U.S.; American refineries are not equipped to handle Chinese crude with its high paraffin content. However, if along with expanded production of crude the Chinese were to further develop their domestic refining capacity, the more valuable refined product could be bartered for additional equipment and technology.
Oil industry estimates of Chinese reserves vary widely. A June 1977 CIA study of China's oil industry reports, "Not even the Chinese know the size of their reserves . . . Working with limited information, experts . . . generally agree that China's onshore oil reserves are comparable with the 39 million barrels remaining in the United States . . . The most optimistic estimates suggest offshore oil reserves are about the same as onshore.
Interest in Chinese oil as an alternative to OPEC oil waned in the U.S. as predictions of Chinese prominence in the market made in the early 1970s proved, if not false, at least premature. Political and physical upheavals in the last few years and Chinese emphasis on oil for domestic use have slowed the growth of Chinese export capacity.
Recent signal from Peking, however, have renewed Western attention to Chinese crude oil. Last May at a conference in Taching, Chairman Hua Kuo-feng was quoted as calling for construction of 10 major oil fields. Vice-Premier Yu Chio-li called for China "to overtake the U.S. economically by the beginning of the next century." And Po Shu-sen, vice secretary general of the Canton Trade Fair, told a reporter, "We consider that by importing foreign technology, we will fortify our self-reliance and help increase the economy.
Visitors on business trips to China increasingly report hearing the Maoist axiom to "use foreign things to serve China," a statement that is revived during periods of emphasis on economic growth.
The rehabilitation of Teng Hsiao-ping, once criticized for pushing oil production with the goal of building a sizable exports capacity, and Chairman Hua's statements "argue strongly for pragmatic economic development," according to Clarke.