Intense negotiations under way in Peking have produced an estimated $50 million in sales of American drilling equipment to China and revived sluggish trade between the two countries, knowledgeable oil industry sources say.
Sources here and in Houston, Washington and Peking say one Texas-based company has just sold Peking two-self-contained drilling rigs for fixed offshore platforms at a total price of $20 million to $30 million. Executives of two other U.S. companies have just arrived in the Chinese capital to compete for the sale of moveable jack-up rigs costing more than $30 million each, Peking and Houston sources say.
The sales, involving several American companies that have been actively courting the Chinese over the last few months, indicate Peking has decided to overlook its diplomatic problems with Washington in its rush to gain advanced U.S. oil technology The negotiations are the most concrete sign to date that China is determined to become an industrial and trade leader through development of its rich oil resources.
Chinese Communist Party Chairman Hua Kuo-feng has called for creation of 10 more oil fields like China's huge complex at Taching in Manchuria. Peking is softening its earlier insistence on economic self-reliance to get foreign help for the crash program. There are reports of approaches to European firms, including a huge order for West German drilling pipe, in addition to the talks with U.S. suppliers.
Caterpillar Tractor Co. of Peoria, Ill., has sold the Chinese about $10 million worth of engines for running oil-field equipment in the last few months. One Texas firm that sold what an executive describes only as a "few million dollars' worth" of petroleum equipment to China recently has had a representative in the Peking Hotel since summer. He has been asked to return for more talks after his Christmas vacation in Houston.
Oil industry sources seem confident that the initial purchases by Peking are only what one described as " the tip of the iceberg." But some note that the Chinese persist in sticking to penny-pinching practices that in at least once instance have caused them trouble in putting advanced U.S. technology to use.
Since 1975, the Chinese have bought three jack-up rigs from a Singapore supplier, Robin Loh, that have included some sophisticated American equipment. One of the $30 million rigs broke down this year after the Chinese declined to buy the customary training program for their rig crews.
In September, several American technicians, not sure where they were going or why were whisked out to the drilling site off the South China coast and asked to save the floundering rig, which they apparently managed to do.
In the most significant of the deals completed so far, National Supply Co., a division of Armco Steel based in Houston, has won a contract to provide two self-contained rigs to be installed on Chinese-made platforms, probably in the shallow waters of the Po Hai Gulf.
Sources familiar with the negotiations say the Chinese will only pay "packaging" costs - the price of having American technician float the rig parts out to the platform and install them - for the first rig. They plan to install the second rig themselves, after watching how the American do it.
Industry sources say Livenston Shipyards of Orange, Tex., and Marathon LeTourneau of Vicksburg, Miss., now have representatives in Peking talking about purchases of more jack-up rigs. The jack-ups, which can be moved by pulling up their legs from the sea floor, are used in oil exploration while the fixed platforms are usually set up over proven oil pockets.
There have been persistent rumors that the Chinese have contacted American firms for the purchase of a semi-submersible rig, a huge barge that is kept steady over a drilling site by computer-run engines. None of the American sources reached could confirm negotiations for such a rig, which can cost as much as $50 million.
Earlier this year the Chinese bought their first semi-submersible, and fourth foreign, rig - the "Borgny-Dolphin," from Norwegian Fred Olsen.
As part of Washington's semi-official effort to encourage trade with Peking, a 10-member delegation of the National Council for U.S.-China trade has arrived in Peking to conduct technical seminars for Chinese oil industry executives. The council sponsored a major tour of American equipment companies by a Chinese delegation last summer, the first tep toward the current negotiations.
The Chinese appear to be following their rule of favoring companies with long-standing relationships, such as National Supply or Houston's Baker Trading Co., whose president, J. Ray Pace, is now in Peking. National Supply has furnished some equipment for the Robin Loh rigs, which gave it an advantage over its Houston competitor, Continental Emsco, in the negotiations over the fixes plaftorm rigs.
The oil executives are reluctant to discuss the negotiations publicly, for fear of alerting competitors or offending the publicity-shy Chinese.
The executives say it is not yet clear how the Chinese plan to finance the equipment purchases. Some bankers expect the Chinse to use the deferred payment schemes they favored in major plant purchases in 1974. Payments on those purchases have now wound down to where the Chinese can afford a new round of buying. Executives do not expect the equipment being purchased now to be delivered before the middle of 1978.
American oilmen say they have been lectured occasionally about Washington's failure to extend full diplomatic relations and to solve financial and trade disputes left from the Communist takeover of the mainland in 1949. But asked if the Chinese had threatened to take their business elsewhere if normalization did not come, one veteran oil executive said, "They have made a point of not saying that."