S-Oil said Thursday it signed a 20-year crude oil supply contract with Saudi Aramco amid concerns of an unstable oil supply due to a U.S.-led oil embargo on Iran.
The long-term deal is exceptional in the international crude oil market where one-year contracts are the norm.
As S-Oil’s refineries process about 669,000 barrels of crude oil daily, the annual supply from the Saudi Arabian state-owned company is estimated to be about 230 million barrels, or 30 percent of Korea’s consumption of petroleum products.
S-Oil executive vice president Kim Dong-cheoul (left) exchanges a 20-year crude supply contract with Saudi Aramco senior vice president Khalid Al-Buainain (second from right) on Wednesday in Riyadh in the presence of Knowledge Economy Minister Hong Suk-woo (second from left), Saudi Arabian Petroleum and Mineral Resources Minister Ali al-Naimi (third from left) and Saudi Aramco chief executive Khalid Al-Falih (right). (S-Oil)
Saudi Aramco is the largest shareholder of S-Oil.
“The recently heightened military tensions around Iran have made the international supply and demand of crude oil extremely unstable,” an S-Oil official said.
“At a time like this, we have been guaranteed crude oil supply from Saudi Arabia, the world’s largest oil producer, allowing stable operation of our refineries.”
The deal comes a day after Saudi Arabia’s oil minister promised to help ensure a stable supply of crude to Korea during President Lee Myung-bak’s visit to Riyadh.
Saudi Arabia has a crude oil reserve of some 260 billion barrels and has a daily production capacity of 12 million barrels, or about 11 percent of the world’s crude production.
Seoul seeks to cut oil imports from Iran in line with U.S. sanctions to make the Middle Eastern country give up its nuclear program.
By Kim So-hyun (firstname.lastname@example.org