India to Finance Mongolia’s Greenfield Oil Refinery Plant

In November, Mongolia and India closed a $1.2 billion gentle mortgage to finance Mongolia’s greenfield oil refinery plant within the South Gobi. To diversify Mongolia’s power sector, Ulaanbaatar is placing its third-neighbor international coverage into financial apply.

Since Mongolia and India boosted their bilateral relations from “spiritual partners” to strategic companions in 2015, the 2 nations’ financial ties have improved. The signing ceremony between Mongol Refinery and Megha Engineering & Infrastructures Limited (MEIL) included the participation of Mongolian Deputy Prime Minister Amarsaikhan Sainbuyan, India’s Ambassador to Mongolia M. P. Singh, Economic Advisor to the President of Mongolia Davaadalai Batsuuri, and officers from Ministry of Foreign Affairs of Mongolia and India.

Mongolia’s pure assets, the primary driver of the nation’s economic system, are certainly a international coverage matter. In addition, Mongolia’s landlocked place between the 2 giants – Russia and China – means it takes further effort for Ulaanbaatar to draw international investments from third-neighbor nations. Hence, the India-Mongolia joint oil refinery is one thing to acknowledge.

Mongolia is thought on the world stage for its coal exports, not for its crude oil manufacturing. However, through the Forties and early Sixties, Mongolia produced oil within the Zuunbayan area – with technical help and educated specialists offered by Soviet engineers.

Following the democratic revolution in 1991, Mongolia pursued a number of packages to ignite its power sector. Programs such because the Petroleum Program (1990) and the Petroleum Sharing Contract (1993) have been applied in collaboration with international companions and power consultants. However, none of those initiatives altered Mongolia’s power sector, nor did they assist develop a totally working system that will forestall from Mongolia being depending on Russia and different energy-exporting nations for oil and different petroleum merchandise.

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Understanding the importance of this undernourishment, the Mongolian authorities supported new initiatives and initiatives not solely to diversify its mining sector but in addition to create an funding alternative, significantly within the power sector. And when India and Mongolia turned strategic companions, Ulaanbaatar noticed a window of alternative. India’s curiosity in growing Mongolia’s oil sector is an instance of the profitable utilization of Mongolia’s third-neighbor international coverage.

From Mongolia’s perspective, given the instability of the area and its power dependence on international suppliers, it’s in Mongolia’s curiosity to have entry to another or a further supply of home provide of power.

The profitable completion of the Mongol Refinery plant shall be a basis for a brand new industrial sector, but in addition may have constructive implications for the economic system at a macro degree, by lowering Mongolia’s forex outflow, stabilizing the costs of petroleum merchandise, and mitigating the nation’s commerce deficit.

“Currently, the country’s demand for petroleum products is mainly dependent on Russian imports. The oil refinery plant will be supplying the country’s demand for various petroleum products including diesel, gasoline, jet fuel, LPG, and fuel oil. This would mean reducing the country’s dependence on foreign supply, and most importantly, strengthening domestic energy supply lines,” Vice Minister of Mining and Heavy Industry of Mongolia Batnairamdal Otgonshar, instructed The Diplomat’s Bolor Lkhaajav.

“With the plant in full operation, we expect to meet 55 to 60 percent of the domestic demand for fuel. Moreover, we project, an increase of 6,000 jobs during the construction phases of the plant and additional 560 permanent jobs after the plant is operational. The goal is to increase GDP by more than 10 percent.”

From a regional perspective – whereas taking into consideration Ulaanbaatar’s complete strategic partnerships with each Beijing and Moscow – the institution of a totally working oil business elevates Mongolia’s relevance and significance within the area.

According to Petro Matad Group, a petroleum exploration firm headquartered in Mongolia, “as of 2022, there are a total of 33 petroleum blocks. Four of these blocks have advanced to production, while exploration is being conducted on 13 blocks under 13 PSCs (production sharing contracts).”

Based on the evaluation of Petro Matad Group and the rising curiosity in Mongolia’s power sector, if applied proper, Mongolia’s oil business may have a constructive affect. As with any new business, this creates a possibility for human capital, educated engineers, and nationwide consultants in a really specialised space of mining.

Despite all of the constructive outlooks and guarantees, these issues can not be mentioned in good religion with out acknowledging the continuing anti-mining and anti-corruption protests. As with earlier embezzlement circumstances involving main state-owned enterprises similar to Erdenet, Erdenes Tavan Tolgoi, and the shuffling of small-medium enterprise funds, new industries and main developments should take an additional step to realize he public’s belief by training monetary transparency, in addition to accountability.

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