Mongolia launched construction of its first oil refinery on Friday, a long-awaited project that is funded by India and designed to end the country’s dependence on Russian fuel.
The ground-breaking ceremony was attended by Mongolian Prime Minister Khurelsukh Ukhnaa and Indian Minister of Home Affairs Rajnath Singh.
The refinery, in southern Dornogovi province will be capable of processing 1.5 million tonnes of crude oil per year, said Mongol Refinery, the state-owned company building the project, in a press release quoted by Reuters. That is about 30,000 barrels per day (bpd).
While this will be small by international standards, Mongolia’s new refinery – planned for completion in late 2022 – will meet all of the nation’s demand for gasoline, diesel, aviation fuel and liquefied petroleum gas (LPG).
“By establishing this strategically important oil refinery, the national economy will become independent from energy imports, and fuel and commodity prices will be stabilised,” said Mongol Refinery in its statement. The project is expected to boost Mongolia’s gross domestic product by 10 per cent, it said.
Mongolia imported almost 1.5 million tonnes of oil products last year, virtually all from Russia. This amounted to 18 per cent of all Mongolia’s imports, according to official data.
The cost of the refinery is estimated at $1.35 billion, and it will include a pipeline and its own power plant.
The refinery will process Mongolia’s own crude oil, which is now sold to China.
Mongolia produced 7.6 million barrels of oil last year, about 21,000 bpd, amounting to 6 percent of its total export earnings. The country’s petroleum industry regulator is expecting its crude oil output to rise over the years prior to the refinery’s start-up.
The refinery’s financing is part of a $1 billion credit line agreement between Mongolia and the Export-Import Bank of India, made during a 2015 visit by Indian Prime Minister Narendra Modi.