AT a time when the international crude prices are soaring and world oil supplies are not increasing in line with the growing global demand, countries depending on oil imports to meet bulk of their demand for crude oil have started attaching far greater importance to their oil security.

The United States, which is the world’s largest consumer of crude oil – with a daily consumption of about 20 million barrels constituting nearly 25 per cent of the total global consumption - has already an oil security plan in place. Its imports are less than 50 per cent of its total requirement.

In view of the tense and uncertain situation in the Middle East, a few years ago, the US increased its imports from countries such as Mexico and Venezuela in a bid to diversify its import sources and not depend only on Saudi Arabia.

The USA had a plan to import a part of its requirements from Russia, in case something went wrong with the Opec. Before the Iraq war, a number of analysts had expressed the view that the US favoured such a war inter-alia to boost its oil security since Iraq was known to have the second largest oil reserves in the world after Saudi Arabia. However, the US authorities have always denied such allegations.

While the US remains the world’s largest consumer of crude oil, growing oil consumption in China during the last few years has made it the second largest consumer of oil in the world after the US.

Although China’s oil consumption at about seven million barrels daily constitutes only about one third of the US oil consumption, the same is expected to grow at a rapid pace in the coming months and years because of the country’s huge population of 1.3 billion and its robust GDP growth of 8-9 per cent during the last two decades or so.

It is quite natural that China is aware of the problem that it may have to face in the coming years due to rapid increase in its local demand for oil, resulting from its strong growth, higher population and rapid pace of urbanization. The country is, therefore, trying to strengthen its oil security in its own way. One should only hope that China’s quest for a better oil security does not result in a clash of interest with any other oil-imports-dependent nation.

At the moment, China is importing a significant percentage of its requirement of crude oil from Russia and Iran. Besides, it can import crude oil from Venezuela and Central Asian Republics, with which it has very good relations.

One of the ways to boost oil security is, to acquire foreign oil companies. About three to four weeks ago, China’s Hong Kong-based CNOOC showed its desire to acquire the US oil company Unocal Corp, which has its operations mostly in the Asian region. The bid offered by CNOOC was higher than that of Chevron even when the latter had slightly revised its bid upward.

However, CNOOC bid to acquire Unocal Corp triggered a strong reaction in the US and the Chinese company had later abandoned its bid following stiff opposition from the US politicians.

As per reports, China’s biggest state-owned oil firm CNPC International Ltd had now reached an agreement for the acquisition of a major oil producer known as Petro-Kazakhstan in neighbouring Kazakhstan for $4.2 billion.

CNPC International Ltd had reportedly agreed to pay $55 per share- a 21 per cent premium over Petro Kazakhstan’s closing stock price on August 19. The deal, which still requires the shareholders’ approval, would be the biggest acquisition so far in a string of Chinese corporate takeovers overseas. Petro-Kazakhstan is based in Calgary, Alberta in Canada, but it has all of its production in Kazakhstan. It reportedly has a reserve of 550 million barrels and exports about 800,000 barrels of oil a day.

According to Paul Sampson, senior correspondent for London-based Energy Intelligence Group and publisher of the Industry newspaper ‘Oil Daily’, the high price offered by the Chinese company showed its desire to secure energy and strengthen its relations with Central Asia, at the same time. China is no doubt well aware of the need to tie up future energy supplies to boost its oil security.

While China has a desire to increase its role in the whole of Central Asia it is particularly interested in Kazakhstan which is poised to emerge as one of the world’s leading oil producers. The discovery of the large Kashagan oil field on its Caspian Sea coast in 2000 was an important event in the history of oil discoveries.

The Chinese president had visited Kazakhstan in July and signed an agreement with the Kazakh President to develop a ‘strategic partnership’. The two governments are already partners in the Shanghai Cooperation Organization – a six-nation security group led by Beijing and Moscow.

The Chinese company, CNPC International Ltd already has its presence in Central Asia. It is a partner of the Kazakh state oil company Kaz-Munai-Gaz to build a $700 million pipeline to carry Kazakh oil to China. Acquisition of Petro Kazakhstan will now guarantee supplies to fill the pipeline in order to meet the crude oil demand in the western part of China.

Apart from Central Asia, China is reported to have signed multi-billion dollar deals to either develop oilfields or to acquire oil and gas from countries as remote as Sudan, Venezuela and Australia.

However, it should be pointed out that the deal for the acquisition of Petro Kazakhstan by China CNPC International Ltd has not yet been finalized. A joint venture of India’s ONGC Videsh, a unit of Oil and Natural Gas Corp and London-based steel billionaire Lakshmi Mittal may also offer a counter bid for Petro Kazakhstan, as reported by Dow Jones newswires.

The Petro Kazakhstan Chief Executive Bernard I sautier had also reportedly hinted that there had been other parties besides China’s CNPC International Ltd interested in acquiring his company, but he had declined to disclose their identity.

So, India is also among those countries which are taking steps to boost their oil security, and has also, has a large population of over one billion, it has been maintaining a GDP growth rate of around six per cent during the last two decades.

Although, the oil consumption in India is estimated to be only about two million barrels daily, at present, the same is likely to increase at a rapid pace, once the growth gains momentum.

One only hopes that the coming years will witness an improvement in the overall security environment in Iraq, Afghanistan and other parts of the world, so that the oil supply can be increased in line with the growing demand and the quest for oil security by different countries in a situation where oil supplies are lagging behind its demand does not lead to a clash among those countries.