Overseas Oil Storage: The Gulf’s Necessary Hedge

Spotlight

• Strategic Oil Storage is as critical for producers and exporters as it is for import‑dependent countries.
• Expanding storage capacity beyond national boundaries would have significantly cushioned the global energy shock triggered by the Iran War. 
• South Korea, Japan, India, and Singapore emerge as viable partners for Gulf producers in hosting offshore oil reserves. 

The structural adaptation triggered by the Iran War’s energy supply shocks underscores a critical dichotomy. It compels a re-examination of how best to guard against supply disruptions of legacy fossil fuels while simultaneously positioning renewable energy solutions as the long-term hedge against the volatility of those same fuels. At the heart of both pursuits lies a single concept—albeit in different forms: storage. Both forms of storage must be placed at the centre of all future strategies by countries seeking effective energy security. In the immediate term, however, the expansion of Strategic Petroleum Reserves (SPRs) represents a more pragmatic strategy, particularly for Gulf oil exporters in the aftermath of active hostilities.

While SPRs are more commonly associated with stockpiling by import dependent countries, the lessons of the Iran War underscore the need for producers and exporters of oil to re-conceptualise storage as a tool for diversification and for safeguarding their capacity to trade even during conflict. In line with this assessment, this commentary argues that Middle Eastern oil exporters should invest in expanding SPRs beyond their own national jurisdictions, in thereby mitigating the risks of access weaponisation witnessed during the Iran War.

Under this model, oil^[1] producers could lease storage facilities in another country, storing their output in exchange for rent and granting the host country first right of refusal in the event of a crisis. The arrangement could also include a bilateral agreement permitting the stored oil to be re-exported from the facility to a third country, should the producer choose to do so.

There are specific conditions that enhance the appeal of a country and a specific site in qualifying as a viable partner for strategic oil storage.

First, the structural properties of the site must align with the form or grade of fuel being stored. This includes both the geological and chemical composition of salt caverns as well as the size and capacity of storage tanks that countries employ for crude oil storage.

Secondly, the chosen location should be easily accessible for both receipt and dispatch of fuel. This requires ensuring multimodal transport network connectivity capable of accommodating tankers, barges, and pipelines, thereby enabling efficient access and redistribution of stored crude.

Thirdly, site selection must account for the integration of redundancies to avoid vulnerability to single points of blockage or failure.

The potential costs and risks inherent in such undertakings, particularly the possibility of sites becoming collateral damage even when neither the producer nor the host country is a direct party to a conflict; must be factored into discussions from the outset.

Fourthly, proximity to major centers of energy demand; including refining and blending facilities, is a critical consideration.  The presence of easily accessible and sufficiently large distribution centres enhances the operational value of a site.

Fifthly, infrastructure to support floating storage in territorial waters, combined with an internationally recognised role in energy arbitrage, represents another vital factor.

Finally, central to site selection is the trust that oil producers can place in host countries on a matter as critical as energy and economic security. This becomes particularly challenging in a geopolitical environment where inter-state relations remain in constant flux. It is therefore, essential that site selection considerations include transparent discussions of each side’s risk appetite. Hosting a strategic reserve inevitably increases risk exposure, requiring governments to account for both malicious intent-based attacks and the consequences of natural disasters. Accordingly, the potential costs and risks inherent in such undertakings, particularly the possibility of sites becoming collateral damage even when neither the producer nor the host country is a direct party to a conflict; must be factored into discussions from the outset. This is especially salient in preparing for future contingencies, given that many Asian countries that qualifying as viable partners for oil storage, could also be vulnerable to a Taiwan Strait or Malacca Strait crisis.

Asian Importers as Energy Storage Hubs and Trusted Partners

In the wake of the debilitating energy supply disruptions of the Iran War, the potential of oil importers such as South Korea, Japan, India, and Singapore to serve as dependable partners of choice for Middle Eastern oil exporters warrants consideration. All four countries meet several, if not all, of the requirements necessary to qualify as viable oil storage hubs. Each also maintains bilateral ties with oil producers such as the United Arab Emirates (UAE) and Saudi Arabia. The UAE, for instance, has established robust cooperation through Comprehensive Economic Partnership Agreements (CEPA) with each of these countries. Similarly, Riyadh has also forged significant bilateral ties with each of these four countries through the Saudi-Singapore Strategic Partnership Council, the Saudi-Japan Vision 2030, the Saudi-India Strategic Partnership Council, and the  Strategic partnership with South Korea. Furthermore, all four countries are geographically positioned at the heart of the fastest growing energy consumption markets of the world.

The UAE, for instance, has established robust cooperation through Comprehensive Economic Partnership Agreements (CEPA) with each of these countries.

As part of a long-term strategy informed by the lessons of the Iran War, the UAE, Saudi Arabia and other Gulf Oil producers could build upon precedents of partnership already established in the sphere of oil storage with these four countries, thereby strengthening resilience and diversifying energy security arrangements.

Japan

Saudi Arabia, the UAE, and Kuwait currently utilise Japanese storage facilities to house portions of their oil reserves, thereby ensuring continuity in their commercial commitments to Asian markets. These arrangements also provide the Japanese government with preferential terms of access to the stored crude.

South Korea 

The UAE stores nearly 2mn barrels of crude oil in the facilities of the Korean National Oil Company under a joint stockpiling plan. Since the start of the hostilities in February 2026, reports  indicate that both the UAE and Saudi Arabia have engaged in discussions with the South Korean government to expand their strategic stockpiling arrangements.

India

Since 2018, the UAE has stored 5.6mn barrels of its crude in the Mangalore facility of Indian Strategic Petroleum Reserves Limited (ISPRL). The Abu Dhabi National Oil Company (ADNOC) maintains these reserves in facilities owned by the Government of India (GoI). While granting the GoI first right of refusal in the event of supply shortages, this arrangement simultaneously allows the UAE to position exportable supplies close to centres of demand. During the pandemic, the UAE re‑exported crude from these reserves to meet its supply commitments in Asia. 

Singapore 

Since February 2026, ADNOC has leased crude oil storage capacity at Singapore’s Jurong Port Universal Terminal Singapore’s extensive infrastructure and its status as a global leader in bunkering, oil trading, refining, and energy arbitrage commend it as an increasingly important destination for strategic storage.

The Gulf producers could supplement such overseas storage initiatives with the expansion of physical storage infrastructure within their own territories.

Sri Lanka

In addition to these four countries, another Asian partner that Middle Eastern countries, particularly, the UAE could further explore for strategic offshore oil reserves is Sri Lanka. Alongside India, the UAE has committed to cooperating on the creation of an energy hub in Trincomalee. A project under discussion since 2023 was formalised through a trilateral Memorandum of Understanding (MoU) between three countries in April, 2025. The agreement includes plans to refurbish the Trincomalee Tank Farm, develop bunker fueling facilities, and construct oil pipelines linking Trincomalee to India.

The Gulf producers could supplement such overseas storage initiatives with the expansion of physical storage infrastructure within their own territories. This dual approach would ensure that inventories have sufficient capacity to expand during supply disruptions, preventing production halts caused by inadequate storage.

The Iran War has revealed many unexpected dynamics- not least the intensity of Iran’s response. While not all of Tehran’s actions could have been anticipated, the blockade of the Straits of Hormuz and attacks Gulf energy infrastructure should have been factored more prominently into wargaming strategies. The oversight has proved costly to the global economy. In this context, the capabilities Gulf producers develop in overseas oil storage could, in the long-run, help rectify this lapse, and emerge as one of the most enduring recalibrations prompted by the war.

Cauvery Ganapathy is Fellow, Climate and Energy, ORF Middle East.

^[1] Notably, crude oil commends itself to being stored over longer periods of time unlike Liquid Natural Gas (LNG) whose chemical properties do not correspond to long-term storage.