CRC honoured its side of the deal by increasing its imports from China from 1.9 million barrels (5.6% of the market) 1974 to 11 million barrels (24.7%) in 1978 (details at Annex B).
5
Then in October 1978, CRC asked also for a site in Chai Wan to facilitate supplies to Hong Kong Island. They repeated their application for a site on Hong Kong Island in December as a result of the Cross Harbour Tunnel Company banning vehicles carrying Category 5 dangerous goods from using the tunnel.
6
With the world-wide shortage of oil following the crisis in Iran, early in 1979 the Hong Kong Government enquired from the Minister of Foreign Trade in Peking and from CRC in Hong Kong whether China would be able to supply more fuel oil to make up the shortfall in supply. At the meeting in Hong Kong, CRC doubted whether China would have additional fuel oil to spare; CRC then went on to raise the question of a site for a depot on Hong Kong Island. In subsequent dis- cussions over the length of lease and premium for such a site, CRC have referred repeatedly to China not only supplying Hong Kong with enough oil to meet its needs but doing so at prices much below international prices.
7
The facts for 1979 do not bear out CRC's contention. The statistics for imports for oil products from China at Annex B show that on the basis of imports up to the end of 1979, imports for all oil products and for fuel oil in particular from China only slightly exceeded the levels for 1978. China retained its 1978 share of the market which indicates, in the context of the savings achieved against expected demand in 1979, that it has not increased exports to any significant extent. Furthermore, as far as sales to the other oil companies in Hong Kong are concerned, CRC has now changed its pricing policy and, instead of charging on the basis of Singapore posted prices, is charging 50% of supplies at Singapore posted prices and 50% at prevailing spot prices. For their sales to their own agents and for their direct sales to the public, their policy appears to be to make as much money as they can. Where it suits them to charge the same price as the other oil companies, they do so; where it suits them to undercut in order to get the business, then they come to a decision on commercial grounds to offer larger discounts. There is no evidence of any wish to provide Hong Kong with oil products other than at prices designed to bring CRC the maximum return. On the other hand, this commercial approach to the business is encouraging as far as considering China a steady source of supply is concerned; and so is the fact that CRC is prepared to invest reasonably heavily in an oil depot,
G.S. 166
CONFIDENTIAL #2
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