Written by: Ahmed Abdel Salam
Saudi Aramco is seeking to double its oil storage capacity outside the Kingdom of Saudi Arabia, as part of a strategy aimed at enhancing the company's ability to protect crude flows and ensure supplies reach customers in the event of export route disruptions or shipping lane disturbances.
Amin Nasser, the company's President and CEO, explained that Aramco is working to expand the scope of its external inventories, with a special focus on the Asian region, which represents the largest oil import market globally. The company currently relies on strategic storage sites in several countries including South Korea, Japan, and the Netherlands, in addition to the Sidi Kerir site in Egypt, which gives it the advantage of being close to key markets and minimizing the effects of any sudden supply chain disruptions.
Distribution of current storage capacities
Data indicates that the storage capacity available to Aramco in the Asian continent exceeds 35 million barrels, and these capacities are distributed between Okinawa with about 8.2 million barrels, Kiire in Japan with 3 million barrels, and Ulsan in South Korea with 5.3 million barrels. In China, storage capacity is available through the local partner Zhejiang Petroleum & Chemical in Zhoushan, estimated at about 18.6 million barrels.
Nasser pointed out that increasing commercial inventories might not be enough to achieve the company's ambitious goals, given the limited capacities of commercial partners, while larger capacities are concentrated in strategic stocks managed by governments. In this context, the Saudi Ministry of Energy is working in coordination with its counterparts in other countries to explore the possibility of making parts of those strategic capacities available to Aramco to expand the company's options and secure crude flows.
Supply challenges and future demand
These moves come in light of sharp fluctuations seen in energy markets, as the market has lost about 3 billion barrels of supply since the beginning of recent crises, which led to increased pressure on prices and highlighted the urgent need for spare capacity. Data from the International Energy Agency also reported that monitored oil stocks have seen a significant decline exceeding 500 million barrels as a result of withdrawals at record rates.
Nasser expects the phase of rebuilding depleted inventories to contribute to an increase in global demand, as the return to normalcy could add about 3 million barrels per day to total demand, due to stock refilling operations and natural growth in consumption, with expectations of demand increasing by 2 million barrels per day over the next two years.
