UAE's ADNOC to store crude in S.Korean facility for 3 yrs -KNOC

Meeyoung Cho
Reuters Middle East

SEOUL, Nov 22 (Reuters) - The UAE's state-run energy giant

Abu Dhabi National Oil Co (ADNOC) will lease oil storage

facilities in South Korea capable of storing six million barrels

of crude for three years, state-run Korea National Oil Corp

(KNOC) said on Thursday.

This is the first time the United Arab Emirates' ADNOC has

leased storage in South Korea, a KNOC spokesman said. It becomes

the twelfth international company to hold storage facilities

located in the world's fifth-largest crude importer, joining

other producers, oil majors and investment banks.

For producers, storage in South Korea gives them flexibility

to meet fluctuations in demand from Asian buyers. It also allows

them to sell smaller cargoes than the two million barrels that

typically sail on Very Large Crude Carriers from the Middle East

to Asia.

For South Korea, leasing storage to producers contributes to

its security of oil supply. It has first rights to crude in

storage in case of emergency.

The storage contract was signed on Wednesday.

"All six million barrels of crude oil will be shipped to the

storage facility within the first half of next year under the

contract," a KNOC spokesman told Reuters by phone. The oil would

be held in storage near the port of Yeosu, about 500 kilometres

south of Seoul, he said.

The Korean government holds a total of 146 million barrels

of storage facilities for its strategic crude and fuel reserves.

Of the total, 40 million barrels of capacity is reserved for

leases to oil producers, majors and investment banks, and as of

end-October a combined 30 million barrels of crude and fuel was

stored there, according to KNOC data.

The announcement was made while Korean President Lee

Myung-bak, and other government and business officials were

visiting the UAE to mark the start of construction there of the

country's first nuclear reactor. A Korean consortium in 2009 won

an order for some $20 billion worth of nuclear plant and

construction work there.

The visit comes after Seoul shut down two reactors in South

Korea due to the discovery that thousands of components at the

plants had forged safety certificates. The UAE has said it has

been assured by Seoul on the safety standards of South Korean


(Editing by Simon Webb and Himani Sarkar)

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