Middle Eastern oil producers seek 'Korean storage base' as Strait of Hormuz exports face disruption

Middle Eastern oil-producing countries have approached the government about using the Republic of Korea (ROK) as an "offshore oil stockpiling base." As the risk of a blockade in the Strait of Hormuz becomes more real, demand is rising to store crude outside the strait in advance.
On the 14th, Yang Ki-uk, Director-General for Industrial and Resource Security at the Ministry of Trade, Industry and Energy, said at a daily briefing of the Middle East Situation Response Headquarters held at Government Complex Sejong, "More and more countries want to use our oil stockpiling facilities," adding, "Interest is particularly high in the Middle East in using Northeast Asia as a stockpiling hub."
Yang noted, "Middle Eastern countries would suffer even greater damage than we would if the Strait of Hormuz were blocked," explaining that "for the Kingdom of Saudi Arabia, the United Arab Emirates (UAE) and the State of Kuwait, crude exports account for a very large share of their national economies." He went on, "From the perspective of oil-producing countries, if they can place crude outside the strait in advance and sell it later, they can reduce risk," and added, "They are showing interest in using Northeast Asia as a stockpiling base and have asked us to discuss the idea."
The ROK is currently storing crude owned by foreign companies in domestic stockpiling facilities through an international joint stockpiling program. Abu Dhabi National Oil Company (ADNOC) of the United Arab Emirates (UAE) is a representative participant. The government says that, in addition to the UAE, other oil-producing countries have also made contact, but it has not disclosed specific names.
Under the international joint stockpiling scheme, crude from oil-producing countries is stored in idle facilities owned by Korea National Oil Corporation (KNOC), and the ROK receives storage fees. In the event of a supply crisis, the ROK also secures the right of first refusal to purchase those volumes.
Yang explained, "Although these volumes are not counted as part of our official strategic reserves, they are physically in the country and domestic refiners have demand for them, so in practical terms they have the effect of expanding our stockpiles."
Use of these stockpiling bases also appears to have played a role in the recent process of securing alternative crude supplies.
Yang said, "When securing alternative volumes, it is difficult to simply make one-sided requests," and added, "As the use of our stockpiling bases came up in the course of talks, it helped the negotiations."
Meanwhile, President Lee Jae-myung said, "It appears that the cease-fire talks on the Middle East conflict that took place over the weekend have failed to find real common ground. Negotiations will continue, but with tensions rising between the two sides over the Strait of Hormuz, it is hard to be optimistic about the situation."
Presiding over a joint session of the State Council of South Korea and the Emergency Economic Review Meeting at Cheong Wa Dae, the Blue House, the President added, "For the time being, we will continue to face difficulties in global energy and raw material supply chains, as well as persistently high oil prices. Taking this as a given, we must further strengthen our current emergency response posture."
aber@fnnews.com Park Ji-young and Choi Jong-geun Reporter