Saudi Arabia to store oil in Singapore's underground caverns from 2027

Saudi Arabia plans to store crude oil in Singapore from the second half of 2027 to strengthen supply security in the region, both countries' energy ministers said on Monday.

The move comes after the US-Israeli war with Iran severely disrupted energy supplies to Asia shipped through the Strait of Hormuz, prompting countries to draw down inventories and raising concerns about stockpile levels globally. Asia imported two-thirds of its oil supplies from the Middle East before the war.

"Saudi Arabia and Singapore are announcing our joint intent to establish an ⁠arrangement for Saudi crude oil to be stored at the Jurong Rock Caverns from the second half of 2027," Tan See Leng, Singapore's minister for Energy, Trade and Industry, told the Singapore International Energy Week conference.

"This arrangement enhances the resilience of the Saudi crude oil supply chain in Southeast Asia, as well as contributes to Singapore's energy security and resilience in the event of supply disruptions."

Tan said Saudi Aramco will sign a memorandum of understanding with the Energy Market Authority and JTC Corp on Monday and aimed to conclude negotiations in a few months' time.

"Bringing supply closer to key Asian markets would strengthen the flexibility of our supply network and support Singapore's security of supply and preparedness," Saudi Arabia's Energy Minister Prince Abdulaziz bin ‌Salman ⁠Al-Saud said in a video recording at the conference.

Located at a depth of 150 meters below the ground, the rock caverns at Jurong Island can store up to 1.47 million cubic meters, or roughly 9 million barrels of liquid hydrocarbons such as crude oil and condensate.

Saudi Aramco currently stores crude in Japan and South Korea where local governments have priority to buy the supplies in the tanks in the ⁠event of an unexpected shortage.

The crude storage capacity in Okinawa was expanded to 8.2 million barrels in September 2017 in an agreement with Japan Oil, Gas and Metals National Corp (JOGMEC), Aramco Japan said on its website.

In 2023, Aramco inked a deal with Korea National Oil Corp to ⁠store 5.3 million barrels of oil in South Korea's reserve facilities in the port of Ulsan for five years.

Elsewhere, Japan is in talks with Asian countries to boost crude reserves across the region, part of the Partnership in Wide Energy and Resources ⁠Resilience Asia (POWERR Asia) initiative proposed earlier this year by Prime Minister Sanae Takaichi backed by US$10 billion in financial support.

While China, Japan and South Korea have built large oil stockpiles, most other Asian countries have less of a buffer in the event of supply shocks.