South Korea's KNOC receives 2 mil barrels of Kuwaiti crude for strategic reserves

State-run Korea National Oil Corp. received 2 million barrels of Kuwaiti crude under a joint storage agreement with Kuwait Petroleum Corp. to serve as strategic reserves for South Korea, KNOC said April 23.

A VLCC carrying 2 million barrels of Kuwait Export Crude (KEC) was docked at Ulsan Port on April 22, where preparations were underway for unloading at the Ulsan stockpiling facility, according to KNOC. The delivery is part of the international joint stockpiling agreement between KNOC and KPC reached on Nov. 1, 2024, to store 4 million barrels of Kuwaiti crude.

The joint stockpiling initiative allows KNOC to lease idle storage facilities to foreign state-owned oil companies for crude oil storage. This strategy generates foreign currency revenue as KNOC will receive leasing fees and have the first right to use the volume for domestic release in case of emergencies or supply disruptions, allowing the Kuwait barrels to serve as strategic reserves for South Korea, a company official told Platts.

This initiative also improves public financial efficiency by sharing crude oil stockpiling costs with oil-producing countries. KNOC's storage facilities are directly connected to major domestic oil refineries via pipelines, ensuring high supply efficiency.

In addition, South Korea's geographical position enhances its value as a logistics hub in the region, particularly for neighboring countries like China and Japan, industry participants and refinery sources said.

The agreement also benefits KPC, allowing for increased access and market share in the Asian market, thus ensuring logistical efficiency for its customers. KNOC emphasized that the international joint stockpiling arrangement is a win-win for South Korea and its partners.

KNOC operates nine storage bases, including Ulsan and Yeosu, which can hold 146 million barrels of crude oil and oil products, including tunnel-type underground tanks and the world's single largest oil storage base.

Of the total capacity, 131.1 million barrels are for crude oil, 14.9 million barrels for refined products and 6.2 million barrels for LPG.

KNOC currently holds 99 million barrels in its tanks, excluding foreign oil, leaving additional capacity available for joint storage of foreign crude.

Major Persian Gulf suppliers

With this recent shipment, South Korea has successfully secured 13.3 million barrels of crude oil from major Middle Eastern suppliers, including Saudi Arabia, the UAE and Kuwait, through international joint stockpiling.

Establishing international joint stockpiling contracts with Middle Eastern oil-producing countries is a significant policy achievement for South Korea, which relies heavily on Middle Eastern crude oil.

In the first two months, Asia's third-biggest crude buyer imported 122.45 million barrels of crude from Middle Eastern suppliers, which made up 74% of the 166.26 million barrels purchased over the period, the latest KNOC data showed.

Kuwait holds particular significance as it was the first country from which South Korea imported crude oil in 1964. To celebrate the 60th anniversary of energy cooperation between South Korea and Kuwait, KNOC hosted a commemorative event in Seoul on April 21. The event was attended by KNOC President Kim Dong-Seop and Sheikh Nawaf Saud Al-Sabah, CEO of KPC, along with other key executives from both companies.

During the event, both parties expressed their belief that this contract would serve as a turning point in solidifying the energy partnership between the two nations beyond merely serving as a storage agreement.

"We will expand our international joint stockpiling efforts to further strengthen South Korea's energy security," KNOC president Kim said.