Seoul: The South Korean government has initiated an audit of its state-run oil company following the discovery that 900,000 barrels of crude oil from a local strategic oil storage site were sold abroad. This announcement was made by the industry ministry on Friday.

According to Yonhap News Agency, the Korea National Oil Corp. (KNOC) is under scrutiny after officials found that crude oil, owned by an undisclosed Middle Eastern oil company, was sold to an unnamed buyer in Southeast Asia. The Ministry of Trade, Industry and Resources elaborated that the oil was stored in Ulsan, in the southeast of South Korea, as part of an international stockpiling program where KNOC leases storage facilities to foreign oil companies.

The stockpiling arrangement includes a provision that grants South Korea priority purchase rights in case of supply disruptions. This discovery comes at a critical time as the country intensifies efforts to curtail oil supply disruptions due to ongoing Middle East conflicts and the strategic closure of the Strait of Hormuz.

The audit aims to investigate any potential legal breaches related to the sale of the oil before South Korea could act on its priority purchase rights. A ministry official stated, "It is impossible to recover the 900,000 barrels now," emphasizing that accountability will be enforced if regulations are found to have been violated.

KNOC has reportedly defended its actions by noting that there was no need to invoke the priority purchase rights, as the Middle Eastern oil company had recently signed a supply contract for 2 million barrels of crude with a South Korean refiner. The oil company stored these barrels in Ulsan as planned, but industry sources suggest that they opted to sell the entire shipment to another buyer due to rising oil prices.

KNOC has retained supply rights for the remaining 1.1 million barrels, as confirmed by industry insiders.