South Korea is accelerating its oil hub project aimed at making Ulsan and Yeosu the center of petroleum trading in Northeast Asia, officials said Wednesday.

The oil hub project in Northeast Asia began in 2008 to build large-scale commercial oil and gas storage facilities in the two cities. It seeks to make the regions a hub for the convergence of petroleum logistics, trading and finance in Northeast Asia as well as to enhance the nation’s energy security in the event of an international oil supply crisis caused by unrest in the Middle East. 

As part of the project, three energy firms -- state-run Korea National Oil Corp., SK Gas and Singapore-based MOL Chemical Tankers -- signed a joint venture agreement Wednesday to build and operate tank terminals for large-scale commercial petroleum products and natural gas in the North Port of Ulsan, according to the Industry Ministry.

The three firms will be major shareholders of a special purpose corporation, called the Korea Energy Terminal, which was set up to construct tank terminals for 1.3 million barrels of petroleum products and 1.3 million barrels of liquefied natural gas in the North Port of Ulsan from 2020 to 2024. Commercial operation will begin from April 2024.

Korea National Oil Corp. and SK Gas have 49.5 percent and 45.5 percent stakes, respectively, while MOL Chemical Tankers has a 5 percent stake.

The North Port of Ulsan project will be injected with an investment of 616 billion won ($526 million), with the three firms setting aside 30 percent of the total and the remaining 70 percent to be funded by project financing.

The North Port of Ulsan project is expected to create 1.4 trillion won in total production inducement effects in the region, according to the Korea Development Institute.

Plans for the South Port of Ulsan project will also be mapped out considering the progress of the construction of the North Port. As for Yeosu, a special purpose company called Oil hub Korea Yeosu, or OKYC, was set up in 2008. It has been operating 1.81 million barrels of commercial facilities since 2013.

The Industry Ministry spokesperson said, “The project is expected to make the two cities the center of petroleum logistics in Northeast Asia by utilizing existing infrastructure such as ports, oil refining facilities and energy clusters.” 

By Shin Ji-hye (shinjh@heraldcorp.com)