Shaikh Mohammad Bin Zayed and Moon Jae-in
Shaikh Mohammad Bin Zayed and Moon Jae-in witness the signing of a memorandum of understanding on the official announcement of oil refining facility contracts by Sultan Ahmad Al Jaber and Ahn Jae-hyun, president of South Korea’s SKEC, in Seoul on Wednesday. Image Credit: WAM

Abu Dhabi: Abu Dhabi National Oil Company (Adnoc) on Wednesday signed Dh4.4 billion deal with South Korea’s SK Engineering and Construction Company (SKEC) to build the world’s largest crude oil storage facility in Fujairah with a capacity of 42 million barrels.

The agreement was signed in the presence of His Highness Shaikh Mohammad Bin Zayed Al Nahyan, Crown Prince of Abu Dhabi and Deputy Supreme Commander of the UAE Armed Forces and the president of South Korea Moon Jae-in in Seoul.

“Construction of the world’s largest single underground project ever awarded for oil storage will enhance the UAE’s energy security, in line with the wise guidance of the country’s leadership,” said Dr Sultan Ahmad Al Jaber, UAE Minister of State and Adnoc Group CEO.

42m

Capacity (in barrels) of the oil storage facility in Fujairah

“Importantly, developing this strategic oil storage mega facility in Fujairah will also support and further enable our broader trading ambitions, strengthening our ability to respond efficiently and competitively to the needs of our customers, while also providing Adnoc with greater flexibility to proactively respond to market needs and commercial opportunities.”

As part of the deal, three underground storage caverns, each with a capacity of 14 million barrels will be built deep below ground level, Adnoc said, adding that the Engineering, Procurement and Construction (EPC) contract awarded to SKEC is the largest for a single project award for underground crude oil storage in the world.

Works have already commenced in 2018 and the first phase of the Adnoc Fujairah underground storage, involving the construction of an access tunnel, has been completed.

When complete in 2022, the underground storage facility will be able to store three different types of crude oil, providing the state owned oil firm to export crude through Fujairah’s Arabian Sea oil terminal.

The latest deal follows an oil storage agreement Adnoc struck with Indian Strategic Petroleum Reserves Ltd (ISPRL) in November to explore storing its crude oil at ISPRL’s underground storage facility at Padur in Karnataka, India.

Adnoc also delivered the final shipment of the initial delivery of Adnoc crude to be stored in another ISPRL underground facility in Mangalore, earlier the same month.

Adnoc also stores up to 6.29 million barrels of crude oil at the Kiire oil terminal in Kagoshima, southern Japan, under an agreement with Japan’s Ministry of Economy, Trade and Industry.

The contract is expected to give a significant stimulus to the country’s products and services, manufacturing and infrastructure sectors with as much as Dh2.2 billion flowing back into the UAE’s economy.

The new facility will help the UAE and other Gulf countries to supply oil securely to the rest of the world bypassing the Strait of Hormuz, which Iran had threatened to close and disrupt oil supplies in the wake of international pressure on its nuclear programme.

“The latest deal is one step beyond energy security. Adnoc is looking to maximise the value of hydrocarbons and expand globally. It is also an economic and financial asset for the company,” Jaafar Al Taie, managing director of Manaar Energy Group told Gulf News.

The UAE also built a 370-kilometre pipeline connecting Habshan in Abu Dhabi and Fujairah with a capacity to transport 1.5 million barrels per day of crude oil. Abu Dhabi Ports is also investing in Fujairah and signed a 35-year concession agreement to develop, manage and operate Fujairah port.