Saudi Arabia and Singapore Agree to Store Crude Oil in Underground Caverns

Saudi Arabia and Singapore announced their joint intention to establish an arrangement to store Saudi crude oil in the Jurong Rock Caverns starting in the second half of 2027, according to the energy ministers of both countries. The move seeks to strengthen supply security in the region following the disruptions suffered by Asia's energy supply through the Strait of Hormuz due to the war between the United States, Israel and Iran, which led several countries to draw down their inventories and raised concerns about global reserve levels.

Tan See Leng, Singapore's Minister for Trade and Industry and Second Minister for Energy, explained during Singapore International Energy Week that the agreement strengthens the resilience of Saudi crude's supply chain in Southeast Asia and contributes to Singapore's energy security in the event of potential disruptions. For his part, Saudi Arabia's Minister of Energy, Prince Abdulaziz bin Salman Al-Saud, stated in a video recorded for the event that bringing supply closer to key Asian markets will enhance the flexibility of the supply network and support Singapore's security of supply and preparedness.

The Jurong Rock Caverns, located on Jurong Island, sit 150 meters below ground and have the capacity to store up to 1.47 million cubic meters, equivalent to about nine million barrels of liquid hydrocarbons such as crude oil and condensate. Saudi Aramco will sign a memorandum of understanding with the Energy Market Authority and JTC Corporation, and the parties expect to conclude negotiations within a few months. According to Lloyd's List, the project envisages storage of up to nine million barrels and would serve as a buffer for the Southeast Asian region during periods of disruption, ensuring continuity of flows.

Aramco already stores crude oil in Japan and South Korea, where local governments have priority purchase rights in the event of an unexpected supply shortfall. Storage capacity in Okinawa was expanded to 8.2 million barrels in September 2017 under an agreement with Japan Oil, Gas and Metals National Corporation, and in 2023 Aramco signed a contract with Korea National Oil Corp to store 5.3 million barrels at the strategic reserve facilities in the port of Ulsan for five years. Japan is also negotiating with other Asian countries to expand crude oil reserves in the region through the Partnership in Wide Energy and Resources Resilience Asia initiative, driven by Prime Minister Sanae Takaichi with financial backing of $10 billion.

Lloyd's List noted that the new facility will give Aramco greater flexibility to prioritize crude allocations, with some benefits for smaller tankers in intraregional freight, although the ultimate impact will depend on how the oil company uses the facility to mitigate geopolitical shocks or capitalize on market trends.