At this point we can use the trip report I wrote at the time to make the main body of the narrative. This will appear on this and the next two pages. Same will be cited followed by some commentary.
SUNDAY, 22 MARCH 1981
Arrived in Beijing after two-day journey from the U.S., Jess Perry came from Florida and met me in Atlanta and Lloyd Berwald of Johnston Boiler came from Michigan and met us in San Francisco. We were met by Ian Stones from Amtech and He Zheng and Chen Gui De from the Oil & Gas Commission in Beijing. We were taken to the Beijing hotel where we were shown our accommodations. There were no additional discussions that day.
The airport was about fifteen miles from central Beijing. Arriving in the evening, we found out that Beijing pretty much “rolled up the sidewalks” after dark in those days. Having grown up in the shadow of the Cold War and heard much about Communist countries, to actually be in one was a very strange feeling as we made our way to the Bejing Hotel.
Narratives such as this spend a lot of time on travel amenities, accommodations, and the like. To get some idea of what travel in China was like in those days, you can take a look at the brochure the Society of Petroleum Engineers put together for their 1982 exhibition in Beijing (which we’ll talk about later.) There’s one thing that needs some explanation and photographs, and that’s the Beijing Hotel itself.
In Imperial Beijing, the “centre of the world” was the Forbidden City, where the Emperor made his abode. One thing that was forbidden was to build a structure that actually overlooked the Forbidden City (a restriction not dissimilar to the height restrictions around the Washington Mall.) After the Boxer (literally in Chinese, the “Righteous and Harmonious Fists”) Rebellion in 1900, when European and American forces occupied the capital, this restriction was done away with, and the first structure built to violate it was the original Beijing Hotel, built by the French.
That part of the hotel became the “old” part of the hotel. With Soviet assistance two additions were made, one on each side of the original structure. Our first rooms, however, were in the old section, and in good Communist style few changes had been made since 1 October 1949, when just down the street Mao Zedong announced that the Chinese people had “stood up.” The rooms were cavernous, with all of their fancy brass plumbing and tubs with feet (we joked that the Chinese could refurbish the hotel with the proceeds from the antique sale of the plumbing.)
For us “foreign devils” (to use another old Chinese expression,) the Beijing Hotel was more than a hotel; some of its rooms became offices for foreign firms in a city with no rentable office space. Amtech used a suite in the hotel for their offices, using the room they had for their personnel in and out of Houston. The Japanese trading companies had very large suites; every time we went to the elevator we were reminded of the large Japanese presence in China. Next to their offices were the stations for the floor boys that serviced the rooms. We used a room in the old section for our negotiations.
Having traveled extensively in the oilfield, Vulcan personnel did not expect grand accommodations, and I was fine with the old section. But neither Amtech nor the Chinese thought it worthy for the President of the company to stay there, and I was subsequently moved to the new section. This at least gave me my best photo of the Forbidden City after I opened the motorised window curtains, but at 195 cm of height the Chinese bed proved a potential challenge. Ian demanded that the hotel management deal with this problem, so the day I moved they placed a table at the end of the bed and made it up with the bed.
MONDAY, 23 MARCH 1981
We began our first meeting with the engineers from Tianjin, headed up by He Ping. The agenda was set up first and the three topics to be discussed were identified by the Chinese as follows: 1) Their presentation of their equipment and requirements, 2) Our presentation of our equipment and its capabilities and 3) the adaptation of our equipment to theirs. They showed us the basic general arrangements to their IHI built barge. They wanted to mount the boiler on the deck inside a house of their construction and connect the boiler to the crane in one of three places at 90° intervals, the chosen connection depending on the position of the platform under construction. Then the piping would proceed up the boom and into the hammer in the usual manner.
After all of our preparations, we arrived at the meeting room and our discussions started at 0900. The Chinese present at the first meeting (most of them during the remaining technical sessions as well) were as follows:
- Liu Ren, Vice Manager , Equipment Department, Oil & Gas Co.
- He Ping, Manager (Tianjin) Equipment Import Department
- Zhu Li Cai, Mechanical Engineer, Equipment Import Department
- Dai Shun Lu, Mechanical Engineer, Equipment Import Department
- Tang Jun Feng, Assistant Engineer and Interpreter, Equipment Import Department
- Yu Pu You, Mechanical Engineer, Offshore Engineering Department
- Wan Nai Kuan, Mechanical Engineer, Offshore Engineering Department
- He Zheng, Equipment Department, China Petroleum and Natural Gas Exploration and Development Corporation
- Chen Gui De, Interpreter, Equipment Department, Oil & Gas Co.
Mr. Chen was not present during most of the discussions. Mr. Tang was their “lead” interpreter. He Ping had learned English while attending a mission school in Tianjin before 1949; Mr. Zhu also spoke some English as well.
So we—and that included myself, Jess, Lloyd and Ian—sat down across the table from these people, sitting in the lace-draped chairs and with tea service “out of nowhere,” as John Fraser would say. We were completely speechless, not knowing where to begin. Finally Ian turned to me and whispered, “Why don’t you ask them what they would like to discuss?” This seemed like a sensible suggestion, and I did. The threefold response is what came back, and that began our discussions.
This was brief and we followed this by our slide presentation, I giving our presentation followed by Lloyd’s brief presentation for Johnston. We then went into our drawings, which comprised the general arrangements for the individual parts and some of the more important component diagrams and instructions. We also presented them with an expanded field service manual and set of Vulcan Tips although we had no intention of going through this in detail. The most important topic discussed during the drawing presentation was the steam consumption. It seems that they were very confused over our phrase of “from and at 212°F” for the lbs. per hour of steam into the hammer, they first thinking that the steam itself was only that temperature (which is impossible) and then positing that, if the rating were changed to 180°C, then the steam consumption would lower itself. The Menck specifications (we definitely found out our competition at this point) as always showed a lower steam consumption, and they felt that this was either due to a gross inefficiency on our part or more probably a difference in rating systems. We explained to them the speed difference but they did not find this satisfying. We concluded our discussions at approximately 1700…
The slide presentation–and these were literal slides, of course–was the first of its kind I had ever given for Vulcan, and I’m not sure anyone else from the company had ever used the medium.
“Menck” was our usual German competitor offshore, based in Hamburg. The previous October my brother and I went to Hamburg and got to see their “non-facility” for manufacturing (they farmed everything out.) Menck’s hammers used the steam expansively, as a regular steam engine would, which both a) allowed more energy to be extracted from the steam, and b) slowed the hammer down. It also complicated the valving system, which reduced its reliability with economical (rubber-lined) steam hose.
In the breaks in the meetings we had a chance to discuss the general situation with the Chinese with Ian Stones. We learned that the Japanese were very well set up in Tianjin and had sold much equipment before anyone else could even get a chance. IHI had been working on this situation for over a year now and only our rapid responses to their telexed questions had saved our situation here. We also met Angelica Ferguson, Ian’s new Chinese assistant. Because of the steam consumption questions we sent a telex for a quote on a 750 hp boiler.
“IHI” was Menck’s licensee in Japan. They also had sold and built the derrick barge that the Chinese had purchased to install the platform with. That gave us the first clue of the Japanese weakness—they were over-confidently assuming that, since they were well entrenched in Tianjin and had sold them the barge, that the hammer was forthcoming. Our rapid responses were critical, but also critical was Amtech’s strong position as well.
But yet another plus for us was the fact that we were actually facing the end user directly, and not having to deal with Machimpex. Because of their priority for energy development, the Chinese had allowed the Oil and Gas people to deal directly with the potential suppliers. Not a few American business people with whom we had contact in China were envious at our position.
Our original quotation of a 1000 hp boiler was based on a) our desire to give the customer the chance to use larger equipment without having to upgrade the boiler and b) some confusion in our specifications. However, the 560 was perfectly capable of full operation with a 750 hp boiler behind it, so we used this opportunity to get some economy in our package.
Ian’s new “Chinese assistant” was in reality the Taiwan-born wife of an American representative for Computervision in China. Her role would grow as the negotiations proceeded.
At 1800 we attended a banquet given for us by the Oil & Gas Commission in the Beijing Hotel. This was attended by many of the people we had been meeting with from Tianjin and the Oil & Gas Commission, including the Vice Commissioner, Mr. He Yun Chin. When “Tianjin” is referred to here, it is normally referring to the Tianjin Offshore Branch of the Petroleum Corporation where the actual field operations are based out of (which are physically in Tanggu)..
The Chinese system of business hospitality is very straightforward: they give you a banquet when you arrive, and you give them a return banquet when things are concluded. A lot of time is spent dwelling on the toasts and the mao-tai, but I’d like to focus on another item—the fish stomachs.
These are a delicacy in the Bo Hai region. The Chinese esteem them highly. Personally I think they have the taste and texture of a sponge. But being something of an omnivore, and not wanting to offend, I did eat this food. But Jess, he would not eat the fish stomachs. The Chinese were quite concerned about this but Jesse stood his ground, and probably got away with it because of his age (he was 63 at the time of the voyage, Lloyd was 56.) The Chinese respected their ages; they referred to them as the “senior gentlemen,” and that made up for my lack of seniority.
Many years later, a young woman got up at my church and recounted her time in Tianjin. She, like Jess, would not eat the fish stomachs. After this speech she sat down. When taking up the offering, I leaned over and said to her, “I did eat the fish stomachs in China.”
Some mention should also be made about the business of chopsticks. They were pretty much the only utensils offered, either at the banquets or in the hotel. I had two choices: I either learned how to use them or starve. Since the latter was unacceptable, I laboured with these, and the Chinese found my technique “interesting.”
TUESDAY, 24 MARCH 1981
Technical sessions resumed at 0830. Although we had a few drawings left to present, the Chinese requested that we go through all the parts of the hammer, describing their function, maintenance, and expected life. I did this with Jesse filling in many of the important details of the maintenance and operation. We were able in the meanwhile to present the rest of the drawings. They requested a price itemized spare parts list and we told them that we would provide this.
In all of my years involved with this kind of equipment, I have never encountered a customer that wanted so much detail on the functioning of the parts of the hammer. We patiently went through all of this. It was here that we were able to present the simplicity and longevity of our equipment, which was and is its strongest asset. Jesse routinely stated (with justification) that many of the parts could last 20-30 years or more, something the Chinese had a hard time believing. After hearing this for one part after another, a skeptical Zhu Li Cai finally said, “I hope you are right.”
The hammer discussions were completed in the morning. The afternoon was taken up mostly with the boiler, Lloyd providing most of the presentation here. Johnston’s preparation here was quite complete with many drawings. The Chinese presented the system the Japanese had proposed with a very complicated piping scheme crowned by the use of Bunker C oil with the necessary heaters required to use this type of fuel. Lloyd pointed out the advantages of the simplicity of the Johnston system which used light oil and which was completely self-contained and packaged. This made a very favourable impression on the Chinese.
In some ways, this was the real turning point in the negotiations from a technical standpoint. The Japanese were way behind us on this, especially in a cold climate such as the Bo Hai. Johnston boilers are used in schools and industrial heating systems with all kinds of fuels, including pulverised coal and trash.
The sessions ended about 1700 and I sent a telex to Chattanooga asking for a spare parts quotation.
The ability to play trans-oceanic ping-pong with the telex is comparable to using email today, although somewhat more expensive. Without it our ability to negotiate properly would have been seriously crippled, even if we had had a decent voice phone connection (which we didn’t.) The “spare parts quotation” referred to is an itemised list, which the Chinese required.
WEDNESDAY, 25 MARCH 1981
The boiler discussion resumed with the technical sessions at 0830. They continued in much the same vein as the previous day until they brought up the question of the steam output of the boilers, which was from and at 212°F. At this point, we rejoined the discussion and I drew up a diagram of the boiler/hammer system and explained to them how the boiler ratings were arrived at and that the hammer rating’s use of “from and at 212°F” did not reflect a hammer requirement but a boiler rating convention. They understood this and a very important question concerning the hammer’s steam consumption was resolved. Some discussion ensued after this point was resolved concerning water quality requirements of the boiler. Lloyd explained to the Chinese that the water quality requirements of the boiler were not as critical with a fire-tube boiler such as the Johnston as with a water-tube boiler like the IHI we were competing against, and that in general potable water was also satisfactory for the boiler too. He left them with extensive water treatment literature.
The whole business of boiler and steam consumption ratings is a fairly arcane subject, and was so even then. The more flexible water quality requirements were yet another plus for Johnston’s system.
It was probably in this session, however, that one of the lighter moments came in the negotiations. Boilers are furnished with manholes and hand holes to enable cleaning and maintenance. The Chinese, asking everything, asked Lloyd, “Can a man really get through the manhole?” Lloyd was about to answer this question when Jesse interrupted him.
“Wait a minute!” Jesse said. “Your personnel, they can get through, but Lloyd, he is too fat, he cannot get through.” Tan Jun Feng dutifully translated this and the Chinese got a good laugh out of it.
It wasn’t the only light moment in our discussions; both Jesse and Lloyd were affable men and cracked quite a few jokes, avoiding off-colour humour. It was a plus that American negotiating teams had over their Japanese counterparts. Evidently nothing is funny with the Japanese. This endeared us with the Chinese, who dealt with their frequently Kafkaesque society with a good dose of humour, as you could see just going down the street.
Upon completion of the boiler discussions the talks moved into their third phase, namely that of the hammer/boiler system on the barge itself. We established the basic complement of fittings and hoses that they would need. The requirements at this point called for two 6″ lines from the boiler to the point on the boom where the two 4″ hoses would connect with the steam line.
After the end of the sessions I sent telexes to Johnston and VIWI Chattanooga for more parts and technical information.
THURSDAY, 26 MARCH 1981
We met in a different place this day. Previously we were meeting in a conference room in the Beijing Hotel but this meeting was held in the Oil & Gas Building in Beijing. We completed our discussions concerning the technical aspects of the hammer/boiler system. They also presented us with a technical appendix which included performance requirement and a request for quality certificates. With this the technical discussions were completed around 1130 and the group posed for photographs.
That afternoon Ian, Angelica, and our people began the contract preparation. This was preliminary since I had not yet gotten the data on the parts from either Vulcan or Johnston. Ian began some explanations concerning the contract procedure and some of the general situation with the Chinese concerning ourselves and our Japanese competition.
To summarize the changes to the contract to this point the Chinese had added the request for the spare parts for the Johnston boiler and had made some changes in the hoses and fittings but nothing else. By the time the 540 was no longer a consideration and only the 560 was being actively discussed.
During the day Thursday Chen Gui De announced to us that we would be attending a “folk ballet” that evening. Jesse was decidedly unenthusiastic at this proposition, but we went. What we were treated to was the Silk Road Episode, a recently composed piece done in traditional Chinese style with costumes and orchestra/instruments to match. It was presented by the Song and Dance Ensemble of the Ministry of Coal Industry of China, which was interesting since we were negotiating with their counterparts in the oil business.
We were blown away—everything about it was gorgeous. It was my first exposure to traditional Chinese style of music and dance, and it was enthralling. It should be noted, however, that such a piece was more than just entertainment. In the program the description of the Epilogue is ended by the following statement: “The traditional friendship between the people of China and other countries would flourish forever.” “Friendship” in official Chinese parlance generally means foreign trade and other like contacts. By putting together a traditional Chinese ballet on a part of Chinese history where the Middle Kingdom wasn’t so isolated from the rest of the world, the Chinese were both signaling their desire to reinvigorate their culture after the Cultural Revolution and to end their economic isolation as well.
The only downside to it was that Chinese theatres, like many things in China, weren’t designed for people as tall as I am, and my knees certainly felt the pain of that. After this we returned to our hotel to continue to make our own “Silk Road Episode” a reality.
FRIDAY, 27 MARCH 1981
We received the requested information from Johnston and Vulcan and spent all morning preparing the contract. Ian and I went over the usual format of pricing that the Chinese usually expected, and also some of their usual procedures as well. This proved helpful in the long run since, once the contract format is set up, this sets the negotiations on a definite basis.
We began the commercial discussions at 1500. These did not last long as commercial discussions since they reverted to technical discussions concerning some of the boiler accessories and also the piping equipment. Jess and they also got into a long discussion on the spare parts since this was the first time they had seen the spare parts quotation itemized. At the end of the discussion, He Ping gave a long dissertation on the quotation, most of which we had already heard through Ian and Angelica; namely, that the Japanese had been working on this order for a long time, that their ocean freight costs would be lower, that they had already built the barge and that adding the hammer and boiler would make a matched system, that their steam consumption was considerably lower and thus would be the operating costs, and many other items. The conclusion of all this would be that they would like for us to reconsider our discount. We told them that we would do so but not until the equipment list was in order (which it still wasn’t since the final equipment list hadn’t been finalized)…
The meeting concluded at 1730. We had dinner with Ian and talked over the contract in detail, since he was leaving for Hong Kong the next day to meet with some officials in the southern part of China, since this area is the next area of the country to develop offshore (after the Bo Hai). Since they were looking for economies in the package, I suggested to Ian to ask them whether they would be receptive to a 750 hp boiler instead of a 1000 hp boiler. He said he would, so after return to the hotel I worked up the 750 hp quotation and passed it along to his office.
It is interesting to note that on this day Mao Dun, the famous Chinese author, passed away in Beijing. It was not until the following year when I was able to purchase a copy of Midnight at the Friendship Guest House and appreciate what a brilliant novel it is.
Johnston’s coming through with their information opened an opportunity to reduce the price, but until now we had not had time to assimilate it into our proposal. In any event, our last dinner with Ian allowed me to first sample one of China’s real delicacies—lychee.
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