The Ambassador in China (Stuart) to the Secretary of State

2010. Following from J. Morch-Hansen, Assistant General Manager Texas Company (China) Ltd., Nanking. Submitted as preliminary response Deptel 948, October 29, 3 p.m.:

Contract between Chinese Petroleum Corp. and Anglo-Iranian Oil Co. arranged in US by New York office of Chinese National Resources Commission. Deal provides for purchase in US currency 2,400,000 barrels crude at US $1.79 per barrel c. i. f. Takao, payment being made 10 days before loading at Abadan for quantity to be loaded. Terms delivery essentially as quoted but possibly with provision for deliveries into 1948 if refinery unable handle scheduled amounts. Refinery expected start operations February 1 next with initial capacity 6,000 barrels per day, this being increased during 1947.

Informant questions whether business placed on competitive bid basis, stating that NRC representatives had previously approached Aramco and possibly also other American companies and had been quoted on f. o. b. source of supply basis which not nearly so attractive as AIOC quotation. He states Aramco since given assurance it will be given chance bid on future business.

Hansen states crude contract does not provide for AIOC supervision of rehabilitation Takao refinery; that AIOC representatives now at refinery solely for purpose assisting setting up pipelines for receiving crude; that AIOC not financing any part Takao reconstruction; and that AIOC not actively interested in Kansu development. He adds, however, that AIOC recently established Shanghai office and is presumably interested marketing.

Informant states also that AIOC about 6 months ago sold to Chinese Merchants Steamship Co. 80,000 tons fuel oil and [apparent omission] thousand tons diesel oil, this business arranged through Chinese Supply Commission, Washington. Has Dept information this deal? [Morch-Hansen.]

Embassy comment: Hansen’s information believed reasonably accurate. Support for his statements on certain aspects CPC–AIOC contract given in report dated November 6 on Takao refinery prepared by Arthur G. May, New York office Stanvac, copy forwarded Dept by ConGen Shanghai with despatch 492, November 19.20 May states AIOC representatives offered to give any technical assistance CPC desired but that refinery manager expressed intention ask Universal Products recommend two technicians for employment by CPC, one petroleum manufacturing and one refinery engineering.

Embassy will report further following discussions with Dr. Wong Wen-hao, president of CPC, accordance Deptel 928, October 24.

  1. Not printed.