OIL EQUIPMENT FIRMS IN US HOPE TO TAP DEMAND IN CHINA

OIL EQUIPMENT FIRMS IN US HOPE TO TAP DEMAND IN CHINA

Faced with dull prospects at home, U.S. oil equipment companies are making a big show at the international exhibition of petroleum equipment and technology here.

Several said they are encouraged by China's renewed reform drive and its large foreign exchange reserves.The week-long show, which ends March 29, has drawn over 200 foreign companies, the majority from North America. U.S. companies dominated the US$300 million worth of equipment imported last year by China National Petroleum Corp.

Visitors at the show see healthy demand for the high technology required to eke out the remaining reserves in China's primary, but dwindling, northeastern fields and to develop new fields in the hostile west.

China's oil production rose a bare 9 million barrels last year to 1 billion barrels. Demand for products is forecast to grow an average of 5 percent to 6 percent a year over the next five years.

While exploration is slowly bearing fruit, China still relies on declining northeastern fields such as Daqing, Dagang and Shengli.

Halliburton Geodata, part of Halliburton Co. of Dallas, supplied Daqing with engineers and measure-while-drilling equipment for China's first horizontal well last September. Stretching 5,700 feet along the seam, it can find oil missed by the thousands of vertical wells.

The company later bagged a "multimillion dollar" technology transfer deal in Xi'an and is negotiating a joint venture, said James Swarr, who will become manager of Geodata's new China office in June.

"We will need an ongoing relationship for future sales and rental. We want to get our equipment here, so it can get exposure," he said.

Another foreign businessman put the trend to technology transfer in a different light: "If you don't do it, (China National Petroleum) will cut you off and you can go home."

China relies on its own technology extensively, even to drill horizontal wells, and is reluctant to pay for imported equipment.

The Baker Sand Control unit of Baker Hughes Inc. of Houston turned down one sale of production equipment for horizontal wells in Shengli because the hole was too narrow, said G.B. Baker, its international marketing coordinator.

Old wells at Daqing are also stretched by injection of steam to loosen heavy deposits. B.G. Technologies of Berkeley, Calif., said it is negotiating the sale of two flow meters for this process.

So far, foreign operators have been excluded from so-called risk contracts in the potentially rich Tarim Basin in the far west. Such deals allow them a share of discovered oil.

Exhibitors said this indicates China is confident of sizable finds. That in turn makes it crucial for outsiders to build up China connections.

Logistical problems in the hostile west are severe.

Li Yugeng, chief engineer at China National Oil Corp., said Halliburton's Brown & Root Inc. unit and the U.S. arm of Italy's Snamprogetti unit were paid to undertake conceptual design of a pipeline to get oil from the Tarim Basin to Luoyang, around 1,500 miles as the crow flies.

The pipeline could cost over US$1 billion, but even if the designs are accepted, no further involvement is guaranteed.