ULSAN, South KOREA, Dec 10 (Reuters) - Korea National Oil Corp (KNOC) expects to complete an underground facility for strategic crude oil storage it is building in the southeastern city of Ulsan by June 2021, the company said this week.
Completion of the underground crude oil cavern will raise the company’s total oil storage capacity to 146 million barrels. KNOC currently has a storage capacity of 136 million barrels to stockpile crude oil and refined oil products, spread across nine facilities, according to data from the state-owned company.
“The construction is part of KNOC’s plans to replace its above-ground oil storage and build a safe and environmentally-friendly underground oil storage facility,” Lee Yeon-kyu, senior manager of KNOC’s Ulsan construction office, told reporters during a site visit on Monday.
The mid-2021 completion date is a delay of six months because KNOC had to revise the layout of the site due to the rock strata encountered, so it took a longer time to dig out the storage caverns, a KNOC spokesman said.
Once the new facility is complete, KNOC will have a total capacity of 16.8 million barrels of underground oil storage in Ulsan, according to the KNOC data.
KNOC has closed 18 above-ground tanks in Ulsan, although South Korean refiners still have their own surface tanks there.
Lee said the storage facility would stockpile mainly Middle East crude grades such as Saudi Arabia’s Arab Extra Light and Oman crude, which are the preferred crudes of South Korea’s refiners. South Korea, the world’s fifth-biggest crude oil importer, takes more than 70% of its oil from the Middle East.
KNOC could also use the underground facility to store oil for joint stockpiling, Lee said. Joint stockpiling is done in partnership with global oil producers and majors, with South Korea holding the first right to buying crude in emergencies.
KNOC currently has joint stockpile agreements with seven companies, including Norway’s Equinor, to store a combined 17.1 million barrels, according to KNOC data.
The new underground oil storage site will have a capacity to hold 10.3 million barrels of crude oil, equivalent to around 10 days of South Korea’s consumption, according to the KNOC data. (Reporting By Jane Chung; Editing by Tom Hogue)