Oman is considering building a facility to store up to 200 million barrels of crude, the head of a state-run oil investment company said.
The proposed facility would be larger than any other tank farm in the world. Working crude storage capacity at Cushing in the US is around 62 million barrels.
Oman is now studying whether there is still enough interest from oil producers and traders to merit building a storage complex on the Arabian Sea coast of south-east Oman.
"We have appointed an advisor to carry out a marketing study for the project," Nasser Al Jashmi, the chairman of the Oman Oil Company (OOC), told Reuters.
"We have regional and international interest but it is too early to name them or give a time frame until our project advisor has submitted a report," Al Jashmi, who is also the undersecretary of the ministry of oil and gas, said.
China is on course to double its strategic reserve capacity to 315 million barrels by 2013, according to US government estimates, but that will be spread across 12 sites built over nearly a decade.
The Omani government could fund the project through the Oman Oil Company, Jashmi said, clawing back the investment by renting storage space at the proposed facility near Duqm to suppliers seeking protection against potential disruptions in the Gulf.
Abu Dhabi's International Petroleum Investment Company (IPIC) announced plans in June to build a 230,000 barrel per day oil refinery at Duqm.
But a senior oil industry source said the UAE had no plans to invest in the strategic storage project, although it would be interested in storing some oil there if Oman went ahead with it.
A Saudi industry source said the world's largest oil exporter already has a large amount of storage capacity spread around the world already.
Like the UAE, Saud Arabia might still rent space in the project, but the plan could see more interest from other Gulf oil producers with more limited Hormuz insurance options like Kuwait, Qatar and Iraq.