Wednesday, May 19, 2010

Oil deal with U.A.E. on tap

Tentative pact calls for a new storage facility in Korea

President Lee Myung-bak, front, looks around the new underground storage facility for crude oil in Ulsan yesterday. The facility, which can store up to 6.5 million barrels of oil, was built over a period of five years. By Cho Mun-gyu

The United Arab Emirates and Korea have agreed in principle to build an East Asia logistics base here that would handle regional oil exports from the Middle Eastern country, sources told the JoongAng Ilbo yesterday.

The two sides have entered the final phase of discussions and are now hammering out the cost of the facility and related details, the sources said.

If the deal is finalized, it could help bring to fruition the government’s goal of becoming an oil hub in East Asia. News of the tentative agreement came after an announcement earlier in the day that Korea has completed a three-decade-long oil facility storage project, furthering those efforts.

Officials from the Ministry of Knowledge Economy and the Korea National Oil Corporation said on condition of anonymity that the U.A.E. government requested permission last year for space to store its oil. The Korean government agreed, and working-level officials from the two countries are now close to sealing a deal, the sources said.

They said the storage facility will likely be able to store 10 million barrels of oil.

The sources added that the U.A.E. is hoping to use the storage facility to meet rapidly growing demand from East Asia.

“The demand for oil is declining in the U.S. and Europe, but it’s rising in East Asia, so Middle Eastern countries will likely be highly interested in this region,” said an official with the ministry, requesting not to be named. “East Asia is also part of the shipping route to the Pacific region, so a logistics base in Korea makes sense.”

The government is considering building a new storage facility for the U.A.E. or leasing existing space to the country.

The sources said the remaining issue in the negotiations over the physical structure likely will be resolved next week, as government representatives from the U.A.E. are scheduled to visit.

The ministry announced earlier yesterday that it finished a 6.5 million-barrel underground crude bunker in Ulsan after five years of construction, the final step in a larger project started in 1980 to boost overall oil storage capacity.

The country can now store 146 million barrels of oil.

“Now, Korea’s energy security is at one of the world’s most advanced levels,” said President Lee Myung-bak during a celebratory address for the completion of the Ulsan base.

The Ulsan storage facility, which is shaped like a cave, is located 100 meters (328 feet) underground. Subterranean water surrounds the cave to keep oil from leaking out, as the two substances don’t mix.

Experts say it was made with cutting-edge technologies, all of which were developed locally.

By Choi Hyun-cheol, Moon Gwang-lip []

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