These Singapore underground oil caverns are for commercial rather than for strategic purposes.

Hyundai wins building bid for Singapore oil caverns

SINGAPORE, April 16 (Reuters) - Singapore moved forward with plans to build a 9.5-million-barrel rock cavern oil storage facility by awarding on Thursday an S$890 million ($594 million) building tender to South Korea's Hyundai Engineering (000720.KS).

The first phase of 1.48 million cubic metres (9.5 million barrels) comprises five caverns on offshore Jurong Island that could hold crude, naphtha, condensate and gas oil, most likely for commercial, rather than strategic purposes. The first two caverns are expected to be operational by 2013.

A planned second phase could add another 1.3 million cu m of storage but a decision has not yet been made.

For cost and operational reasons, underground caverns are often used to hold long-term strategic stocks rather than more actively traded barrels.

The U.S. government stores its strategic crude reserves in four underground sites, while South Korea leases out its tanks to refiners to be used for strategic purposes.

Industry sources say underground caverns, which normally cost more than an above-ground facility of similar capacity, are typically used for barrels that remain in-tank for longer periods and are not traded in and out of tanks rapidly. ....

For phase one of the cavern project, there will be about 7.0 km (4.3 miles) of galleries and tunnels.

Once both phases are completed, the project could raise oil storage capacity in land-scarce Singapore to nearly 11 million cubic metres or almost 70 million barrels. ....