TNAG-0947-FCO40-1166-Oil-developments-in-and-around-Hong-Kong-1980 — Page 28

C.S. 166

CONFIDENTIAL

機密

- 3 ·

XCCI(80)23

The Crude Oil Option

5

The Board of Owensbord Enterprises met on 6th October

to discuss the situation and agreed that a new option should be explored as well as the original scheme. This new option would involve :-

(a)

purchasing a cargo of technically suitable crude oil (which should be easier to obtain than fuel oil);

(b)

6

(c)

(d)

chartering a Very Large Crude Carrier (VLCC) to transport the oil to a refinery in the region. (It should be noted here that there is likely to be a delay of at least a few months before the refining of this cargo could be fitted into a refinery's schedule);

having the oil refined and trading the non-fuel oil products for more fuel oil or selling them off with the proceeds being used to offset the cost of the scheme; and

decanting the fuel oil into two smaller tankers

to be moored in Hong Kong waters until transfer to the power companies' new land storage facilities could

be arranged.

This scheme may be somewhat easier to bring into effect than the fuel oil option but it will have its own problems. The amount of oil being sought is a large cargo by world standards and negotiating arrange- ments for refining and trading or selling the non-fuel-oil-products will be complicated. A particular aspect of the refining arrangements is the possibility that the Government of the country where the refinery is located might commandeer the oil in an emergency situation, Oil company sources advise this is a real possibility and it is accordingly being assessed with the assistance of the relevant British Embassies. There is, however, no intrinsic reason why this scheme should not be feasible and it could produce some savings on estimates for the cost of the original scheme.

The Present Position

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The Board recognises that a flexible approach to the acquisition of the oil, whether crude or refined, is required and the project manager are therefore actively exploring several lines of negotiation. This is thought at this stage to be more likely to be fruitful than a further calling of tenders as such. Over the approximate period 10th to 14th October, consideration was being given to an apparent offer of 200 000 metric tons of fuel oil of the right specifications. This came to nothing partly because the price was too high (US$250 per metric ton as opposed to the Rotterdam

CONFIDENTIAL **