CHINA is trying to profit from rising oil prices and revive the interest of foreign petroleum companies in its so-far paltry discoveries of offshore oil. Beijing recently announced vague incentives for foreign investors as part of what it calls a 10-year strategy to develop offshore oil. It also hinted that it soon plans to allow foreign oil companies to survey the East China Sea, one of the largest uncharted areas of potential oil reserves in the world.
Beijing's courting of foreign oil executives, however, is likely to be shrugged off. China has yet to prove that there is enough untapped offshore oil to make investment in drilling pay off, say Western diplomats and oil industry experts here.
Also, foreign executives are leery of Beijing's wooing of oil officials. Dozens of Western companies have invested $2.7 billion in China's offshore oil since 1978 in the biggest business venture between capitalists and Chinese communists. Only a few of the companies have discovered oil and expect to recoup their exploration costs.
The uphill effort to coax oil investment from abroad underscores Beijing's desperation to ease its severe energy shortage, diplomats and oil industry experts say.
Thousands of factories across China must shut down several hours each week because of scant power. The debilitating energy shortfall is widely considered the biggest obstacle to China's ambition to double its gross national product by the year 2000.
Large-scale production of offshore oil would give China's economy a needed fillip by bolstering lucrative oil exports and easing the energy shortage, Chinese officials say. China exported 200 million barrels of oil last year to gain hard currency.
Oil from the seabed would also enable Beijing to ensure it need not hold down costly oil imports, which were logged at 23 million barrels last year, the officials say.
With the rise in oil prices during the Gulf crisis, the cost of importing oil threatens to cut deeper into China's precious holdings of hard currency. In the first seven months of this year China imported 82 percent of its total oil imports for 1989.
Hamstrung by a tight fiscal deficit, China must rely on foreign investment to tap its continental shelf. It is using the jump in oil prices to entice foreign companies to invest in offshore drilling.
``The near-doubling in the price of oil is very good for us,'' says Wu Xunduo of the state-owned China National Offshore Oil Corporation (CNOOC). ``We're hoping for peace in the Middle East, but we're enjoying the rise in oil prices.''
As part of a 10-year development strategy, China plans to build major crude oil production bases in the South China Sea, says Mr. Wu, director of CNOOC's international liaison department. It also will construct offshore oil refineries and ``other major petrochemical projects'' in an effort ``to create a better environment for foreign investors in offshore oil during the 1990s,'' Wu says.
For instance, CNOOC hopes to build China's largest petrochemical works in a joint venture with Shell Oil Company in Huizhou, Guangdong Province. The $2 billion complex could annually refine 40 million barrels of crude oil and produce 4 million barrels of chemical products.
The project is awaiting the approval of the State Planning Commission, which in recent months has balked at funding new, large-scale capital construction projects.
Wu acknowledged that because of a strict state policy of austerity and scant government funding, the 10-year development strategy hinges primarily on the investment of foreign oil companies. In short, the state must rely on foreign investors to bankroll a plan that is largely aimed at luring foreign investment.
``There's really nothing new'' in the strategy announced by CNOOC, says Edward Chow, Beijing representative for Chevron Overseas Petroleum Ltd. ``If the Chinese plan is to sweeten incentives for foreign oil companies, we haven't seen it yet.''
Beijing has had more success in wooing foreigners with the prospect of exploration in the East China Sea. Twelve foreign oil companies have expressed interest in surveying the 184,000-square-mile area, according to official press reports.
``The East China Sea looks very interesting to us geologically,'' Chow says. ``We hope the Chinese government would see fit to open it up to foreign participation soon,'' he says, expressing a view shared by several foreign oil executives in Beijing.
The proposal to allow foreign oil rigs in the sea faces political resistance from officials who oppose foreign involvement in a strategic industry and uphold the Maoist credo of self-reliance, according to official press reports and foreign oil executives.
Consequently, the oil beneath the East China Sea could prove as elusive as the vast reserves of oil that foreign companies early in the last decade mistakenly believed lay beneath other seas on China's continental shelf.
In those years, 46 foreign oil companies rushed to explore what was believed to be the largest reserves of uncharted offshore oil in the world. The companies assumed 100 percent of the risk and spent several million dollars each in exploration. Only a few discovered oil and expect to pay off their survey costs.
``We're much more cautious as an industry than we were 10 years ago,'' Chow says.