The Abu Dhabi National Oil Company (ADNOC) and South Korea's SK Engineering and Construction Co. Ltd (SKEC) signed an agreement on Wednesday to build the world's single largest underground oil storage facility that would boost ADNOC's flexibility to export crude oil and support its push into oil trading.
ADNOC has awarded SKEC an Engineering, Procurement and Construction (EPC) contract to build three underground storage caverns, each with a capacity to hold 14 million barrels of crude oil, in the Emirate of Fujairah on the eastern coast of the United Arab Emirates (UAE).
According to ADNOC, the contract is the world's largest for a single project for underground crude oil storage and is valued at US$1.2 billion (4.4 billion UAE dirhams).
Work on the project started last year and the first phase-the construction of an access tunnel-has been completed, ADNOC said. The underground oil storage project is expected to be ready in 2022.
"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," Sultan Ahmed Al Jaber, UAE Minister of State and ADNOC Group CEO, said in a statement.
In recent years, ADNOC has signed major deals to boost its downstream business, aiming to lock in future demand for its crude oil.
Last month, ADNOC signed strategic partnership agreements with Italy's Eni and Austria's OMV, under which the European oil majors bought minority stakes in ADNOC Refining and the three companies agreed to create a trading joint venture.
"These innovative partnerships will support our ambition of becoming an international downstream leader with the flexibility to respond quickly to shifting market needs and dynamics. They will help enable our objective of unlocking even more value from every barrel of oil we produce," ADNOC's Al Jaber said at the signing of the deal at the end of January.
By Tsvetana Paraskova for Oilprice.com
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Tsvetana is a writer for Oilprice.com with over a decade of experience writing for news outlets such as iNVEZZ and SeeNews. More