Offshore oil work for China raises British hopes for more trade

British companies are cautiously optimistic about continuing to improve trade with China following the recent agreement with British Petroleum (BP) to start exploration work off China's coastal regions and a deal to supply two hovercraft for Yangtze River ferry services.

The hovercraft, which are worth (STR)1.5 million ($2.27 million) and will be built by Vospor Hover Marine, will be based at Wuchan, in central China.

Although British trade with China has slackened considerably and the BP contract took four years to negotiate, United Kingdom companies interested in Far East trade are heartened by recent deals. There may be some spinoff engineering contracts for other British companies, once BP's exploration develops in the South China Sea and the Yellow Sea in the mid-'80s.

British shipyards, for instance, are eagerly looking for oil rig construction jobs that would offset a grim decline in marine work.

China has insisted that companies like BP pay exploration costs and about half the development expenses if oil is found. Early testing of China's coastline indicates substantial reserves, but future drilling operations could be subject to typhoons.

British Petroleum, which has long experience in drilling in the deep and frequently stormy waters of the North Sea, is believed to have accepted tough conditions from the Chinese government in order to be the first company to explore China's shallow coastal waters.

With the approaching rundown of Britain's large North Sea oil fields and the switch to smaller oil zones, companies like BP are especially eager to export expertise and capital to China's reputedly rich undersea petroleum areas.

(A Scottish Member of Parliament has been pressing the British government to build a new generation of oil rigs in advance of orders from exploration companies, a project that worked successfully some years back when Scottish rig yards ran completely out of contracts.)

In addition to BP's involvement in China's oil exploration, U.K. companies have long helped the republic to develop the country's vast coal deposits.

But the delicate political talks going on between China and Britain over the future ownership of Hong Kong could have a significant part to play in the two countries' commercial relations. Britain's lease on Hong Kong will run out toward the end of the century. The British government appears to be unhappy about China's present negotiating attitude.

China canceled a naval contract with the U.K. earlier this year.

Still, it is known that the Chinese very much want to obtain foreign expertise in harnessing domestic petroleum assets to an economy being linked increasingly to the oil business.

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