TNAG-0947-FCO40-1166-Oil-developments-in-and-around-Hong-Kong-1980 — Page 85

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CONFIDENTIAL **

For discussion

on 26th August 1980

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MEMORANDUM FOR EXECUTIVE COUNCIL

HONG KONG OIL REFINERY PROJECT

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On 22nd April 1980, Members considered memorandum XCR (80)46 ****w and recommended acceptance of Recommendation (3) of the Advisory Committee

ón Diversification, that:

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"In the interests of facilitating the diversification

pem of Hong Kong's industries, the Government should

re-consider the feasibility of establishing an oil refinery in Hong Kong. "

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This memorandum reports on the progress in implementing this recommendation and seeks advice on the next step. to take.

di kas pane Hong Kong oil refinery project

In the early 1970s, two groups of companies gave serious consideration to building an oil refinery in Hong Kong. The groups were Hongkong Refinery Ltd., a joint venture between Textile Alliance Ltd. (TAL) and TOA of Japan, and a joint venture between Shell Oil Company and Dow Chemical Company. At that time a site inthe north of Lamma Island was identified as suitable for a refinery, for Shell. TAL/TOA were considering a site on Lantau, but this is not now available. The sharp rise in crude oil prices in 1974 and other changes in the world economic environment led both these groups to abandon their proposals in 1975.

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Since that time, the price of crude oil and hence oil products has continued to rise, as has the capital cost of building a new refinery. However, three factors have made reconsideration of the possibility of building an oil refinery in Hong Kong worthwhile

(a)

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the recognition that the Government should try to ensure that the diversification of Hong Kong's industries is not being impeded;

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(b) the increased need to try to improve the security

of supply of oil products, which has been threatened on occasions in recent years, and to gain some

control of the cost to Hong Kong of these products; and Juoda

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