Saudi Arabia expands crude storage inside South Korea's strategic reserve

Riyadh puts more barrels closer to Asia: Saudi Arabia is expanding crude storage inside South Korea’s Strategic Petroleum Reserve — giving Seoul more supply buffer while giving Riyadh a stronger foothold in one of Asia’s most refining markets, the Arabic press reports. The two countries signed an MoU covering cooperation across oil, gas, refining, petrochemicals, energy investment, crude pipeline infrastructure, innovation, and digital transformation.

The mechanisms are simple but the positioning matters: Saudi barrels stored in Korea can function as commercial inventory for Aramco and as emergency cover for Seoul. In 2023, Aramco had inked a five-year agreement with KNOC to store 5.3 mn barrels of Saudi crude at one of KNOC’s storage facilities in Ulsan, South Korea, with the Asian country holding emergency purchase rights over the barrels.

The Kingdom is not the first Gulf producer to run this playbook: UAE energy giant Adnoc has used a similar model with KNOC — securing storage access in Northeast Asia while giving South Korea priority access during supply disruption. Kuwait has also signed a two-year agreement to store 4 mn barrels of crude at Ulsan on similar terms.

IN CONTEXT- “Producers of crude oil and condensates in the Gulf region typically have limited need for large storage capacity beyond what is required for logistical purposes,” global oil markets strategist and former Onyx Group head of research Harry Tchilinguirian previously told EnterpriseAM.

Korea has been hardening its energy system since the regional disruptions exposed how dependent its refiners are on Gulf flows. In April, Seoul said it had secured 273 mn barrels of crude through year-end from Middle Eastern producers and Kazakhstan — routed outside the Hormuz — including Saudi commitments to ship 50 mn barrels in April-May through Red Sea ports and prioritize Korean companies for another 200 mn barrels through year-end.

Why this matters for Korea: South Korea is one of the world’s major crude importers, with Middle Eastern barrels accounting for 70% of its crude imports in January-February. Its petrochemicals base adds another layer of exposure, with S&P also describing Korea as Asia’s biggest naphtha importer and naphtha as a key feedstock for ethylene, which feeds plastics, synthetic fiber, and rubber. That makes any disruption around the Gulf, Hormuz, or long-haul tanker routing a direct feedstock risk for Korean refiners.