“Such a pact is unprecedented in the oil industry,” said a Dhahran-based expert. “Generally one-year contracts are the norm.”

The deal aims to ensure a stable crude oil supply to Seoul for the next 20 years.

“This long-term contract points to their faith and immense confidence in Saudi Arabia; they don’t want to look anywhere else and are comfortable with Saudi Arabia,” said the expert. “This is a win-win situation for both the producer and the consumer.”

The Indians and the Chinese, for example, have tried to buy oil from multiple producers. The South Koreans, however, have stuck only to Saudi Arabia for their energy security.

At the contract signing event in Riyadh on Wednesday, S-Oil Executive Vice President Kim Dong-cheoul exchanged a copy of the 20-year crude supply contract with Saudi Aramco Senior Vice President Khalid Al-Buainain in the presence of Petroleum and Mineral Resources Minister Ali Al-Naimi, Saudi Aramco CEO Khalid Al-Falih and South Korea’s Knowledge Economy Minister Hong Suk-woo.

“The recently heightened military tensions around Iran have made the international supply and demand of crude oil extremely unstable,” an S-Oil official was quoted as telling the media. “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.”

According to S-Oil, the deal will ensure stability of its refinery operation despite the sanctions on Iranian oil and Iran’s threat to block the Strait of Hormuz.

S-Oil is South Korea’s third-largest refiner with 669,000 barrels per day capacity and Saudi Aramco supplies almost all the crude it processes into fuels. Saudi Aramco owns 35 percent of S-Oil.

Since S-Oil’s refineries process about 669,000 barrels of crude oil daily, the annual supply from Saudi Aramco is estimated to be about 230 million barrels, or 30 percent of South Korea’s consumption of petroleum products.

This deal signed during the three-day visit of South Korean President Lee Myung-bak to Riyadh was followed by the inking of another accord between the two countries to boost cooperation in the health sector, said South Korean Embassy spokesman Woong Chul Pak.

Woong said: “Riyadh and Seoul are also working on a proposal to sign a defense pact in the near future.”

Lee held talks with Defense Minister Prince Salman on Wednesday and agreed to significantly bolster defense cooperation to improve relations in non-economic sectors. Both countries agreed to conclude the defense cooperation pact at an early date, possibly in the first half of this year.

“The Kingdom will also post a military attaché at the Saudi Embassy in Seoul, who will be the Kingdom’s first military attaché in a Far East nation,” said a diplomat on the condition of anonymity. Lee also invited Prince Salman to visit Seoul.