Consulting firm will run the oil refinery

20th of 8, 2018

Following the laying of its foundation stone on 22 June, hopes are high that Mongolia will finally have the long-talked-about oil refinery. The investment of $1 billion is assured, and work should soon begin on the planned two-stage construction. G.Ider asks B.Ankhbayar, Head of the Division of Non-metallic Mineral Production at the Ministry of Mining and Heavy Industry, how things are at the moment.

What is the Ministry’s assessment of the feasibility study made by Engineers India and submitted in March?
Italy’s Kinetics Technology S.p.A. will be conducting an independent study and use its findings to review and comment on the work by the Indian company. These will then be assessed in detail by the Mineral Professional Council, and that will be the final feasibility study. We expect this process to be concluded by the end of July.

We have been told that between 1,000 and 1,500 jobs will be created, directly and indirectly, during construction and around 600 regular employees will be needed once the plant starts operating. It is expected to produce between 1.2 million and 1.5 million tonnes of products, and require around 20 MW of electricity and 1.5 million tonnes of water. Does the feasibility study corroborate all this?

Where will the water come from? Are our water resources enough?
Yes. The feasibility study expects the water to come from Bor Khuuvur gobi ground water. The Ministry of Environment and Green Development announced in 2014 that this water could be used for industrial purposes. All water-related infrastructure work will be done with part of the $1-billion soft loan from India. We are confident the water resources are adequate. The final decisions on the plant’s power sources will be taken on the basis of the feasibility study. Temporary lines would provide electricity during the construction period, but after that the plant must have energy security, so maybe it will have its own generating plant.

Toson-Uul XIX, Tamsag-XXI and PSC-97 blocks together have proven reserves of 332.6 million tonnes and total proven extractable reserves of 43.3 million tonnes. The extracted crude will be supplied to the refinery, but do we have enough of it to justify the refinery?
This 43.3 million tonnes is enough to keep the plant busy for 30 years, by which time some of the ongoing exploration work will surely discover new sources. One reason why the plant is being built at Altanshiree soum of Dornogovi aimag is that the area has potentially rich oil reserves. Umnugovi aimag and other areas also have oil. So, feeding the plant will be no trouble.

The $1 billion provided by India can be used only for the oil refinery. Is that a problem?
The feasibility study thinks the complete construction can be done with the $1 billion. A working group led by Minister of Mining and Heavy Industry D.Sumiyabazar visited India on June 13 and successfully resolved all issues around the investment in talks with officials of the Foreign Ministry of India and Exim Bank, which is formally providing the loan. Our next important task is to select a project management consulting firm. This firm will most likely be an Indian one but we shall also have a role in it to ensure that Mongolia’s best interests are served.

Will it be possible to start operation in 2022, as planned?
The project team that set the date feels it is an achievable target, if there is no unforeseen delay. We are keeping to the schedule, and it is most important for us to know that the Mongolian people have faith in our competence and resolve.

A state-owned company has been established to be responsible for the refinery. How will it operate and will there be an overlap between its role and the Ministry’s?
The company will implement the project and so will be concerned mostly with daily operations. The Ministry will provide policy guidance, keeping the broader picture in perspective.

How does the Ministry plan to implement the State policy on the petroleum sector that was approved this June?
We feel the policy document has not brought in any radical change in what we do or how we work. Successful implementation depends on all parties in the sector working together and I am sure we shall do this.

The oil refinery in Zuunbayan of Dornogovi aimag, which operated from 1951 to 1969, produced by-products such as coke and helium. What do we get from the new refinery in this respect?
There may not be much as these days it makes more economic sense to have maximum focus on the main product, but we shall know more when the plant is in actual operation. The plant will produce petrol, aviation fuel, etc. but when we achieve 100% self-sufficiency in meeting domestic demand in these, the product range could change in response to market conditions, and, of course, on national policy.

How far has work progressed?
We have started work on the infrastructure. Construction of the 20-km railway and the road from Sainshand to Altanshiree has begun and the power line is also being built.  

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