Saudi Arabia to store crude in Singapore caverns from 2027

Summary

• Saudi crude will be stored at Singapore's Jurong Rock Caverns starting in the second half of 2027.
• Aramco already holds crude in Japan and South Korea under priority-purchase arrangements with local governments.
• Singapore becomes the third Asian storage host as regional buffers face post-Hormuz supply anxiety.

The latest

Saudi crude oil will be stored at Singapore's Jurong Rock Caverns from the second half of 2027 under a joint arrangement announced by both countries' energy ministers on Monday, according to Reuters. Singapore's Tan See Leng said the arrangement strengthens the resilience of the Saudi supply chain in Southeast Asia and supports Singapore's own energy security in the event of disruption.

Details

• The agreement: Saudi Aramco signed a memorandum of understanding with Singapore's Energy Market Authority and JTC Corp on Monday, Tan See Leng told the Singapore International Energy Week conference. He said the two sides aim to conclude negotiations within a few months, without naming the volumes Aramco intends to place in the facility.
• The facility: The Jurong Island rock caverns sit 150 metres below ground and can hold up to 1.47 million cubic metres of liquid hydrocarbons, roughly 9 million barrels of crude oil and condensate, according to Reuters. The site is Singapore's main underground storage asset for liquid fuels.
• The Saudi framing: Energy Minister Prince Abdulaziz bin Salman Al-Saud said in a video message to the conference that moving supply closer to key Asian markets would strengthen the flexibility of the kingdom's supply network and support Singapore's preparedness. He did not set out a commercial structure for the arrangement.
• The trigger: Reuters reported the move follows the US-Israeli war with Iran, which severely disrupted energy shipments to Asia through the Strait of Hormuz. The disruption pushed countries to draw down inventories and raised concerns about stockpile levels globally.
• The exposure: Asia imported two-thirds of its oil supplies from the Middle East before the war, according to Reuters, leaving the region's refiners heavily dependent on a single maritime chokepoint for the bulk of their feedstock.
• Japan precedent: Aramco's storage capacity in Okinawa was expanded to 8.2 million barrels in September 2017 under an agreement with Japan Oil, Gas and Metals National Corp, Aramco Japan said on its website. Tokyo holds priority rights to buy the stored barrels during an unexpected shortage.
• South Korea deal: Aramco signed an agreement with Korea National Oil Corp in 2023 to store 5.3 million barrels at reserve facilities in the port of Ulsan for five years, Reuters reported. The same priority-purchase principle applies to that inventory.
• Regional push: Japan is in talks with Asian countries to lift crude reserves across the region under the POWERR Asia initiative proposed this year by Prime Minister Sanae Takaichi and backed by $10 billion in financial support, according to Reuters.
• The gap: China, Japan and South Korea have built large oil stockpiles, but most other Asian countries hold far thinner buffers against a supply shock, Reuters reported. Singapore's arrangement addresses that gap for Southeast Asia's main refining and trading hub.

Between the lines

The commercial logic is unchanged from Japan and South Korea: Aramco gains forward-positioned barrels near its biggest customer base, while the host government secures first call on that crude in a shortage. Applied to a trading hub rather than a consuming state, the same template positions Singapore as a regional release valve for Southeast Asia, where most buyers hold thin reserves.

What's next

Watch for the conclusion of negotiations within months, as Tan said, and for disclosure of the volume Aramco will place at Jurong. Storage is scheduled to begin in the second half of 2027.

Source: Reuters