TNAG-0947-FCO40-1166-Oil-developments-in-and-around-Hong-Kong-1980 — Page 153

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1. He konie 221/3

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Reference.

Mr Williamson (Hong Kong & General Dept."?

HEK162

K1620

PROSPECTING FOR OIL IN HONG KONG

HIL

28 N42 80

DESK OFFICER

INSE

PA

1. Thank you for sending me the Hong Kong Executive Council paper on the approach to them by Cluff Oil Ltd for a licence to prospect off-shore Hong Kong.

2.

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$18.00

t is not for me to comment on the political desirability or otherwise of allowing applications for oil exploration in or around Hong Kong. I can see that the potential boundary problems which might result make this difficult.

3.

It is true that the recent award of exploration concessions in the South China Sea by the Chinese Government to western oil companies including BP has excited interest in the potential of the area. There is no doubt that most oil companies consider the area to be sufficiently promising to warrant full-scale survey and exploration activity. They believe that the off-shore prospects are promising and we know that oil has been found. on-shore along the South China Sea coast. This does not of course mean that oil might exist in or around Hong Kong. Without knowing precisely why the earlier geological advice given to the government advised there was no possibility of oil being present, I can comment no further. However Hong Kong covers a relatively small area and, I understand, only a three mile territorial sea. This does not provide a very large exploration area and must be considered to reduce chances of oil being discovered.

4.

That said if the Hong Kong Government were to decide that it wished to proceed, it would presumably wish to consider whether it wanted to give exclusive rights to one company covering the whole area within its jurisdiction or whether it should offer areas to more than one company. This does not imply that I have any doubts about Cluff Oil's standing or capabilities. They are a young but very dynamic oil exploration company which came to prominence a few years ago in the North Sea. Mr Algernon Cluff's entrepreneurial flair has made his company one of the most active and successful of the small independent oil exploration companies.

5.

Finally, I agree with the doubts expressed in the EXCO paper that if oil were to be found it seems very doubtful if Hong Kong would have the land area available to be able to develop a comprehensive oil industry. It would seem likely that any oil produced would need to be exported and refined elsewhere.

27 March 1980

cc: Mr Fursland FED

Mr Rushford Legal Advisers

DJ HARDING

Energy, Science and Space Department

SECRET