Mongolia to have an oil refinery in the next three years

Mongolia to have an oil refinery in the next three years

Each year, over a million tonnes of oil come to
Mongolia from refineries abroad

Annually, Mongolia imports approximately 1.1 million tonnes of oil products, of which 98.2 percent is from Russia, 1 percent from China and 0.6 percent from S. Korea, spending approximately USD1 billion. 60 percent of the imported oil products are sold wholesale and 40 percent is sold retail.

As of 2011, Mongolia’s consumption of oil products reached 1.050 million tonnes, of which 32 percent were petroleum, 2.27 percent—fuel for airplanes, 60 percent-diesel fuel, 1.7 percent- fuel oil, 3.8 percent –bitumen and 1.0 percent- liquefied gas. Growth of oil products consumption of any country directly connects with growth in GDP. According to a study of the recent decade, 1 percent growth of Mongolia’s GDP resulted in a 1.0-1.35 percent growth of fuel consumption. To estimate GDP to be an average of 14 percent in 2013-2016, annual fuel consumption is likely to reach 1.7-1.8 million tonnes.

For Mongolia, that depends almost entirely on one country for its fuel, it is necessary to establish an oil refinery in order to eliminate oil dependence and maintain economic security. Does Mongolia have sufficient oil extraction to justify establishment of an oil refinery? How much oil reserve products does Mongolia have?

Mongolia became an oil exporter, exporting 351,500 tonnes in 2011 and extracting 3.38 million barrels of oil by 2012. It is estimated that it has the potential to extract 1.5 million tonnes of oil by 2015. Income from oil to the State Budget are increasing year by year. In 2012, Tgs104 billion came to the State Budget from oil. It was planned to bring Tgs14 billion in 2013 and Tgs300 billion in 2016 from oil to the budget. Mongolia has been registered to have an identified exploitable reserve of 35-42 million tonnes of oil. Therefore, it is intended to establish a refinery with the capablity of processing no less than a million tonnes of oil per year.

It requires taking 3-4 years and USD680-750 million to establish an oil refinery which is capable of processing 2 million tonnes oil a year.

Mongolia has the potential to extract
1.5 million barrels of oil by 2015

“Mongolia’s oil extraction reaches production levels; therefore, we seek to establish an oil refinery which can provide 60-70 percent of the domestic oil supply within the next three years,” said G. Olziiburen, acting chief of the Oil Authority. The government set up a working group on establishing an oil refinery and reflected it in the 2013 State Budget as a relevant expense to work out a Feasibility Study for the refinery. A joint working group of the Ministry of Mining, Ministry of Foreign Relations and Ministry of Economic Development is working on this issue.

To build a refinery which is capable of processing   million tonnes of oil, it will require USD680-750 million. To build a refinery with 1.5 million tonnes capacity, the government needs to spend USD550-650 million.

Source: THE MONGOL MESSENGER