Mongolia Launches Construction of 1st Oil Refinery with Help from India

Reuters, June 25, 2018

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. Friday’s 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. That is about 30,000 barrels per day (bpd). The refinery will be small by international standards, with most Chinese facilities each processing hundreds of thousands of barrels of crude per day, and India’s Reliance Industries running one refinery at a record 1.2 million bpd. Still, 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 percent, it said.

Mongolia imported almost 1.5 million tonnes of oil products last year, virtually all from Russia. They amounted to 18 percent of all Mongolia’s imports, according to official data. Mongolia, a large landlocked country wedged between giants China and Russia, has a population of just 3 million. Almost half its people live as nomadic stock herders, and the country’s oil demand is growing only very slowly.

From a national security perspective, we do need to diversify our sources of oil products from the current single source, Russia,” said Munkhdul Badral Bontoi, chief executive of Mongolia-based market intelligence group Cover Mongolia.

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. Mongolia’s big southern neighbour China produces around 3.8 million bpd of crude, and imports more than 9 million bpd, according to official government data.


A Mongolian oil refinery has been discussed since 1997, but while several projects were approved, none have been completed. 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.

The Indian guarantee is what put the odds in favour of the oil refinery being finally built, but the biggest worry here is whether the oil refinery can pay for itself,” said Munkhdul. “Economically, I’m sceptical of the viability of a domestic oil refinery, as fuel prices are heavily regulated,” he added.

(Reporting by Munkhchimeg Davaasharav; Additional reporting by Henning Gloystein; Editing by David Stanway and Tom Hogue)

Click here to read the full article from Reuters.

Copyright 2019 Thomson Reuters. Click for restrictions.

Comments and Discussion

There are no comments yet.

Add a Comment

Please log in or register to participate in comments and discussions.

Inspectioneering Journal

Explore over 20 years of articles written by our team of subject matter experts.

Company Directory

Find relevant products, services, and technologies.

Job Postings

Discover job opportunities that match your skillset.

Case Studies

Learn from the experience of others in the industry.

Event Calendar

Find upcoming conferences, training sessions, online events, and more.

Industry News

Stay up-to-date with the latest inspection and asset integrity management news.


Read short articles and insights authored by industry experts.


Commonly used asset integrity management and inspection acronyms.

Asset Intelligence Reports

Download brief primers on various asset integrity management topics.


Watch educational and informative videos directly related to your profession.

Expert Interviews

Inspectioneering's archive of interviews with industry subject matter experts.