The Abu Dhabi National Oil Company (ADNOC) announced that it is building the world’s largest single underground project ever awarded for oil storage, with a capacity of 42 million barrels of crude oil, in the Emirate of Fujairah on the eastern coast of the United Arab Emirates.
An Engineering, Procurement and Construction (EPC) contract has been awarded to South Korea’s SK Engineering and Construction Co. Ltd (SKEC) to construct the three underground storage caverns, each with a capacity of 14 million barrels, deep below ground level. The EPC contract is the largest for a single project award for underground crude oil storage in the world and is valued at AED 4.4 billion (US$ 1.21 billion) with approximately 50 per cent of the contract spend feeding back into the UAE economy through ADNOC’s In-Country Value program.
The ADNOC Fujairah Underground Storage will strengthen the UAE's position as a reliable supplier of crude oil as well as give ADNOC greater flexibility, allowing it to manage and optimize its delivery schedule and support its broader move into trading. It will also enhance its position as one of the key trading and supply partners in Fujairah’s growth as a global oil and products storage and trading hub.
In celebration of the cooperation between the UAE and South Korea, an agreement to announce the mega-project was signed in the presence of His Highness Sheikh Mohamed bin Zayed Al Nahyan, Crown Prince of Abu Dhabi and Deputy Supreme Commander of the UAE Armed Forces, and President Moon Jae-in, President of the Republic of Korea, at the Blue House, in Seoul. The agreement was signed by His Excellency Dr. Sultan Ahmed Al Jaber, UAE Minister of State and ADNOC Group CEO, and Jae Hyun Ahn, SKEC President & CEO.
H.E. Dr Al Jaber said: “Construction of the world’s largest single underground project ever awarded for oil storage will enhance the UAE’s energy security, in line with the wise guidance of the country’s leadership. 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.
“ADNOC has a long and successful history of working with Korean companies as partners in our upstream concession areas, as contractors for major projects across the oil and gas value chain, and as a customer of Abu Dhabi’s crude oil and our refined products. This project is a testament to the strong strategic partnership between UAE and South Korea and to the capability of SK Engineering and Construction Co. Ltd, given the scale, sophistication and value of this construction”
Works commenced in 2018 and the first phase of the ADNOC Fujairah Underground Storage, involving the construction of an access tunnel, has been completed.
When complete in 2022, the ADNOC Fujairah Underground Storage will be one of the largest facilities of its kind in the world and able to store three different types of crude oil, providing ADNOC with increased flexibility to export crude through Fujairah’s Arabian Sea oil terminal.
Jae Hyun Ahn, CEO of SKEC, said “We are progressing well in our project with ADNOC in the construction of the world’s largest single storage facility in hard rock, located in Fujairah. SKEC are committed to providing high quality services, as well as supporting the local UAE economy, as we grow our expertise in global energy storage.”
The EPC contract award followed a robust tendering process that included a rigorous assessment of how much of the contract value would support the growth and diversification of the UAE’s domestic economy through ADNOC’s In-Country Value program.
With as much as AED 2.2 billion (US$ 600 million) expected to flow back into the UAE’s economy, the contract will give a significant stimulus to the country’s products and services, manufacturing and assembly and infrastructure sectors, as well as creating additional employment for UAE nationals.
In November, ADNOC signed a memorandum of understanding with Indian Strategic Petroleum Reserves Ltd (ISPRL) to explore storing ADNOC crude oil at ISPRL’s underground storage facility at Padur in Karnataka, India. This agreement followed the arrival of the final shipment of the initial delivery of ADNOC crude to be stored in another ISPRL underground facility in Mangalore, earlier the same month.
ADNOC also stores up to 6.29 million barrels of crude oil at the Kiire oil terminal in Kagoshima, southern Japan, under an agreement with Japan’s Ministry of Economy, Trade and Industry.
In March 2018, ADNOC awarded two contracts to Samsung Engineering of Korea to introduce crude oil processing flexibility and a separate contract to recover power and water at the ADNOC-owned Ruwais refinery. In the upstream, Korea’s GS Energy was awarded a 3% stake in the ADNOC Onshore concession in May 2015, while Korea National Oil Corporation (KNOC) and GS Energy hold a 40% stake in the Al Dhafra Petroleum concession area, where first crude oil production is expected in 2019.
Korean companies are also important customers of ADNOC’s crude oil and refined products, including LPG, base oil, naphtha and fuel oil.