For three-quarters of a century before today's socialist China came into being, the United States and British oil monopolies dumped their products into our country at enormous profit, ruthlessly interfered in our internal affairs, and used their oil as a club over the heads of the Chinese people. "No possibility of commercial oil deposits exists," they said of China as they tightened their economic and political domination.

Sources and derivation-Continued.

figure of 10.8 percent for all of 1962, but this figure appears to be for the growth of gross value product for the entire petroleum industry, not for crude oil output.

1962: Japan Petroleum News, Vol. 5, No. 1248. 8 Jul 1965.

1963: 1971/63 (output in 1971 divided by output in 1963) equals 5.77, in Jen-min Jih-pao, 27 Sep 1972; translated in Survey of China Mainland Press 72-41, Oct. 10-13, 1972, p. 124. The actual statement was that the average annual growth rate of crude oil production for 1963-71 was 24.5 percent.

1964: Premier Chou En-lai, at the Third National People's Congress, reported that the output of petroleum would increase by "more than 20 percent" over 1963. NCNA-Peking, 30 Dec. 1964. In 1975, he announced that output in 1974 was 650 percent higher than in 1964 (FBIS, 20 Jan 1975, D-21). Output in 1974 is estimated at 65.3 million.

1965: 1969/65-1.88, in Economic Reporter, October-December 1973, p. 24; also, 1972/ 65 4.0, in FBIS, Daily Report: People's Republic of China, 5 Sep 1973, p. B-10.

1966: NCNA-Peking. Sept. 26, 1966 reported that output for the first 8 months was up by 28.4 percent over 1965.

1967-1968: The lack of yearend growth figures for crude oil output and disruptions to production and/or transportation associated with the Cultural Revolution--which render extrapolation on partial-year data particularly difficult-make the estimates for 1967 and 1968 the least accurate of the estimates presented here. Since any attempt to estimate crude oil output for 1967 and 1968 involves making entirely arbitrary assumptions, I have used what I consider the simplest possible methodology. The data on which the estimates are based are presented below, followed by a description of the methodology used.

A. "The output of oil and oil products in the 9 months between January and September (1967) surpassed the corresponding period of 1966, which was itself a year of tremendous increase over 1965."-China Pictorial, 3, 1968, p. 39.

B. "Output of crude oil and refined oil products for the first 8 months of this year surpassed the state targets. Crude oil output was 34 percent and output of refined oil products 43 percent higher in August than in January. Average daily output of crude oil in some oil fields rose 40 percent last month compared with the period before the Cultural Revolution. More gasoline, kerosene, diesel oil, and paraffin were produced in the first 8 months of 1968 than in the corresponding period of the record output year of 1967.”—FBIS, Sept. 27, 1968, B-3.

C. "In the first quarter of 1969, crude and refined oil output are respectively 64 and 51 percent above that of the corresponding period of 1968 Shale oil output topped the quota for the first quarter by 31 percent... Their (Ta-ch'ing's) crude oil production, which surpassed their quotas for the first quarter, is a new Ta-ch'ing quarterly record. The volume of crude oil transported from the oil field and crude oil processed are 84 and 37.9 percent above that of the same period last year.. Output (at Yumen) for this quarter was 46 percent above the corresponding period of last year Ta-ch'ing oil field's workers hit an all-time monthly production high for the field in March, and production of crude oil and refined oil was 62.4 and 28.2 percent over what it was in March last year."FBIS. Apr. 24, 1969. B-1.

1967: For 1967, I assume that output in the first 9 months was 5 percent higher than in the corresponding period of 1966; 5 percent is chosen because statement A appears quite modest. This gives an output of 10.9 mmt during the first 9 months. The output rate in the final 3 months is assumed to be equal to that of January 1968, which I estimate at an annual rate of 11.9 mmt (see below)-or 3 mmt for the 3-month period. Thus total output for 1967 is estimated at 13.9 mmt. Note that reference B refers to "the record output year of 1967". This does not necessarily mean that the above estimates, rounded to one decimal place, are wrong; one should, however, be aware of this possibility.

1968: Assuming that growth in 1969 occurred at an even rate, output in the first quarter of 1969 was at an annual rate of 20.3 million metric tons. This was (according to C above) 64 percent higher than in the first quarter of 1968, which thus was at an annual rate of 12.4 mmt. Output in August 1968 was 34 percent higher than output in January (B above); thus between January and August, crude output grew at a monthly compounded rate of 4.3 percent. If the annual rate of output for the first quarter of 1968 was 12.4 mmt, then output in January was at a rate of 11.9 mmt-since 12.4-2 (January output rate +1.088 January output rate) and where 1.088 times the January output rate is the output rate of March. I assume that output in 1969 continued to grow at the rate of January to August, i.e., 4.3 percent monthly. Calculating the approximate area under the curve thus generated, one can estimate output in 1968 at 15.2 mmt, or 9.4 percent higher than in 1967 and 33.6 percent below output in 1969.

1969: 1970/691.409, in Peking Review, 47, 24 Nov 1972. p. 17.

1970: 1971/70-1.286, in Ibid. Revised upward from previously announced 27.2 percent increase.

1971: Mainichi Shimbun, 22 Dec 1973; also, Peking Review, 39, 29 Sep 1972. p. 12, reported that crude oil input in 1971 had increased by "more than 300-fold" over 1949 (1949 output was 121,000 tons). Note that 36.7 divided by 0.121 is 303.3.

1972: Ibid. However, note that a 16 percent growth rate was announced in British Broadcasting Corporation. Survey of World Broadcasts, Far East, W706, 10 Jan 1973, p. A/7. Presumably the 17.2 percent increase represented by the figures given in Mainichi is a revised figure.

1973: NCNA on 12 Sep 1973 announced that "In August the average daily output of crude oil was more than 20 percent higher than in Dec 1972." See FBIS. 19 Sep 1973, p. B-5. The figure here is derived by dividing 1974 output by 1.2. The derived figure implies a growth rate of 26.7 percent for 1973.

1974: Crude output in 1974 increased by 20 percent; it was "more than six times that of 1965" (FBIS, 3 Jan 75, p. E-10). I assume that 1974 was 6.05 times 1965 output (10.8).

But China rose in revolt against the bullying of imperialism and the treachery of its internal allies. Swept out with the trash were the robber oil companies and their foreign oil. China will never produce oil, they had said. The Chinese people proved them wrong.

This interpretation of China's past is of more than historical interest. China's current opposition to joint or cooperative development of her oil resources has as its source, at least in part, the real or imagined unsavory practices of the international oil companies of that era.

1949-52

Until the First Five-Year Plan (1953-57), activity in the petroleum industry was directed toward the rehabilitation and restoration of existing facilities. The government concentrated on restoring to operation those facilities that could be rapidly brought into production. The two obvious facilities were the Yu-men oil field and Northeast Petroleum Plant No. 1 at Fu-shun. Both of these installations had suffered from wartime operation in excess of designed or optimal capacity and from inadequate maintenance. By 1950, Yu-men had surpassed its previous peak production, and by the end of 1952 restoration of Northeast Petroleum Plant No. 1 was completed. Concurrently, the small facilities for producing natural crude oil at Tu-shan-tzu in Sinkiang Province and at Yen-ch'ang in Shensi Province were restored to partial operation, as were the small synthetic oil plants at Hua-tien and Chin-chou in Northeast China. The natural crude oil refinery built by the Japanese at Dairen was operated during this period on crude oil imported from the U.S.S.R.

Aside from restoration the Chinese used these years to study the potential of the industry and to prepare for its expansion under the First Five-Year Plan. These was no sizable investment in the industry, and little effort was directed toward the development of new resources. Through the restoration and improvement of existing facilities, however, the Chinese increased crude oil production from 121.000 tons in 1949 to 436,000 tons in 1952, surpassing the peak of 321,000 tons established in 1943.7 Imports from the U.S.S.R. during this period accounted for 50-70 percent of the petroleum consumed in China. (see table 1 in Appendix B).

1953-57: First Five-Year Plan

China's First Five-Year Plan (FFYP) called for the transformation of China "from a backward, agricultural nation to an advanced socialist, industrialist state." The petroleum industry was described as being in a "particularly backward state", and it was acknowledged that at the end of the plan period the oil industry would still be “far from being able to supply the needs of the national economy."

The plan for the petroleum industry focused on exploration for additional natural crude oil reserves. Exploration and drilling were to be "energetically" pushed forward in Kansu, Sinkiang, Szechwan, and Tsinghai Provinces. The rate of drilling in 1957 was to be 7.3

7 See table 1.

First Five-Year Plan for Development of the National Economy of the People's Republic of China in 1953-57, Peking, Foreign Languages Press, 1956, p. 13 (hereafter cited as First Five-Year Plan).

• Ibid., p. 73.

times that of 1952, and over the 5-year period 55.18 million tons of natural crude oil were to be added to China's known reserves.

Productive capacity of existing oil wells in the Northwest, especially at Yu-men, was to be rapidly increased; the output of crude oil in the oilfields of Sinkiang was also to be increased and the exploitation of new oilfields begun. By 1957, the productive capacity of crude oil throughout the country was to be 4.2 times the 1952 figure. Existing equipment for extracting oil from shale and coal at Fu-shun and other places was to be fully utilized, and the productive capacity of synthetic crude oil in 1957 was to be 2.6 times that of 1952.

Refining capacity was also to increase. A "huge" modern oil refinery was to be built and existing refineries restored or reconstructed; by 1957, refining capacity was to be 2.5 times that of 1952.

In the 5-year period, crude oil output was to increase at an average rate of 35.8 percent and in 1957 was to be 4.6 times the amount of oil produced in 1952. But, given China's continuing requirement for oil imports, "the state must initiate measures to effect economy in the use of oil and to encourage the use of its substitutes, and these must be strictly enforced throughout the country."

To carry out these plans the Chinese allocated more than half of the 1.9 billion yuan invested in the petroleum industry during 1953-57 to exploration.10 As a result, proved reserves increased from less than 30 million tons of natural crude oil to more than 100 million tons in 1957.11

Output of natural and synthetic crude oil during the FFYP grew from 436,000 tons in 1952 to 1.458 million tons in 1957-short of the goal of 2 million tons but still constituting average annual growth of 27.3 percent. The production of natural crude oil grew from 195,000 tons in 1952 (45 percent of total) to 850,000 tons in 1957 (58 percent).12 Despite this growth, almost 1.4 million tons of petroleum were imported annually from the Soviet Union.13 Imports as a percentage of total petroleum supply remained virtually unchanged over the period (58 percent in 1952; 55 percent in 1957).

1958-62: Second Five-Year Plan

The Chinese clearly were dissatisfied with the progress of the petroleum industry during the First Plan. In spite of rapid growth in crude output, petroleum imports remained high and commanded a large share of China's foreign exchange. At a conference held at Yu-men, Vice Minister of the Petroleum Industry K'ang Shih-en complained about the costly and time-consuming search for large oil deposits and explained the approach to be taken in the Second Plan period.14

14

In the past we placed our hope on the big oilfields and the high production and naturally flowing wells, but we hoped against hope for 8 years and nothing happened. In 1957 the production of natural oil was only about 800,000 tons. We can

10 Chi-hua Ching-chi (Planned Economy), No. 12, 1957, pp. 12-15. The yuan-dollar ratio in the 1950's was roughly 2.4 :1.

11 K. C. Yeh, Communist China's Petroleum Situation, Rand Corp. Memorandum RM3160-PR, 1962, p. 29.

12 Ibid., p. 5.

13 See appendix B, table 1.

14 Shih-yu K'an-t'an (Petroleum Exploration), No. 15, 1958, pp. 3-9; translated in JPRS: 1478-N, Apr. 13, 1959, pp. 4ff.

not afford to wait anymore. Henceforth, we need the big oilfields but we also need the small ones. We should develop the big and the small fields without exception. For the time being, we would do well to develop the small and shallow ones, and make greater use of native methods. At the same time, we should not neglect the big and deep wells and the use of foreign drilling methods.

Shallow oil-bearing strata were widespread throughout China, and whereas drilling an 1,100-meter exploratory well at Yu-men, using modern methods, cost 195 yuan a meter, the use of native methods to drill to depths of 200-400 meters cost only 3 to 5 yuan per meter.

This matter can be handled by the cooperatives and, within 5 years, it will be easy to open several tens of thousands of wells. On the basis of an annual yield of 20 tons per well, 100,000 wells will produce 2 million tons of crude oil a year.

A similar approach was to be taken in the synthetic oil industry: small local plants producing 300 tons annually were to supplement the output from the large modern plants-thus helping to insure that by 1962 the goal of producing one ton of oil for each ton of steel produced would be met.

This policy, like others based on the "mass line" of the Great Leap Forward, was short-lived. Halfway through the Second Plan period, policy for the oil industry once again emphasized "shooting the eleplants" and leaving the "mice."

Midway through the Second Plan period, China's exploration effort began to pay greater dividends. Proved reserves doubled, reaching 200 million tons in 1959-60.15 Crude oil output grew from 2.264 million tons in 1958 (65 percent natural crude) to 5.8 million tons in 1962fulfilling the goal of 5 million to 6 million tons established for the Second Plan-and the rate of growth (32 percent) exceeded that of the previous period.

This rapid growth of domestic crude oil output reduced dependence on foreign oil. Imports averaged more than 2.8 million tons annually (38 percent of total consumption) during the period; but, after reaching a peak of almost 3.3 million tons in 1960, they began to decline. In 1961, oil imports declined to just over 3 million tons; the following year they fell again, to less than 2 million tons-a downward trend that was to enable the Chinese to boast, in 1963, that they were "basically selfsufficient" in oil.

Behind this decline in imports, and the single most significant development in the history of China's petroleum industry, was the discovery and development of the huge petroleum reserves of the Sung-Liao Basin in Northeast China. The principal Sung-Liao oilfield, Ta-ch'ing (roughly, "great celebration"), began production in 1960, when approximately 400,000 tons of oil were lifted. By 1963, Ta-ch'ing was producing an estimated 2.3 million tons of crude oil-36 percent of PRC output.16 The discovery of large reserves in Northeast China meant that China had commercially valuable oil resources located reasonably close to the industrial and population centers of the Northeast and East. Transportation costs for the oil industry fell, and prospects for oil exports brightened.17

15 Yeh, op. cit., p. 29.

18 For data on Ta-ch'ing see the table in appendix A.

17 Data on transportation costs during the 1950's are available in Yeh, op. cit., pp. 32-33.

* Produced at unknown fields and/or remainder due to inaccurate production estimates at known fields. Note: Parentheses indicate lower degree of certainty.

Source: See app. A.

1963-Present: Self-Sufficiency

In 1963 China produced only 6.4 million tons of crude oil; oil imports supplied 21 percent of the oil consumed. Eleven years later, in 1974, crude oil output had risen to 65 million tons, and China no longer depended on oil imports. Not only was the pace of economic development no longer constrained by inadequate oil supplies, but oil exports had also emerged as a major source of hard currency earnings. Of particular interest to the international oil community was that Peking had begun exploratory drilling to ascertain offshore reserves-reserves which, although largely unconfirmed, were being compared by outsiders to those of the Middle East.

These developments were the most obvious manifestations of a series of oil discoveries made since the early 1960's, of which Ta-ch'ing was only the first.18 The development of Sheng-li, Ta-kang, P'an-shan, I-tu, Fu-yu, and perhaps other oilfields, shifted the center of the oil industry from the West and Northwest to the East and Northeast (see table 2). Synthetic petroleum, which accounted for 35 percent of crude output in 1958 and was still an important source of oil in 1963, had become quite small in percentage terms-at most, synthetic output was 3 to 3.5 million tons or 5 percent of output in 1974.19

This was an entirely new era. The intense search during the 1950's and early 1960's for large new deposits of natural crude oil had paid handsome dividends. China was not oil-poor and the stage was set for its entry onto the international oil scene as an exporter.

18 For information on the development of and production at China's known oilfields see appendix A. See the note on synthetic oil production in appendix B.

51-174 O-75-16