Mongolia Pegs $1 Billion From India for Oil Refinery & Pipelines

Source: Bloomberg 12/19/2016, Location: Asia

Mongolia will seek approval from the Import-Export Bank of India to build an oil refinery and pipelines with $1 billion in infrastructure funding negotiated last year, a project that could boost the nation’s gross domestic product by 10 percent.

The government intends to use $700 million of the loan for an oil refinery and $264 million for oil pipelines, according to a statement on its website last week. Prime Minister Erdenebat Jargaltulga has instructed relevant ministries to negotiate with the Ex-Im Bank of India, according to the statement.

Indian Prime Minister Narendra Modi signed agreements last year to provide the $1 billion credit line to fund railroad and infrastructure projects in Mongolia. The Indian Ambassador in Ulaanbaatar Dr. T. Suresh Babu didn’t immediately respond to an email seeking comment.

Mongolia is looking to India and other investment partners as its economy contracts and its debt burden grows. Last month, China backed off from talks with Ulaanbaatar over a loan package to help the economy after a dispute over the visit to Mongolia by the Dalai Lama.

The refinery, to be sited in Sainshand county, will have a capacity to process 1.5 million metric tons of oil per year. It will produce 560,000 tons of gasoline, 670,000 tons of diesel fuel and 107,000 tons of liquefied gas annually. The refinery could boost Mongolia’s GDP by 10 percent, according to the statement.

Sainshand, located on the Trans-Mongolia railway, is planned to be a transportation hub. Mongolia’s oil fields are primarily located in Dornod province in eastern Mongolia, about 545 kilometers northeast of Sainshand. PetroChina Daqing Tamsag Llc operates the oil fields and has produced 7.5 million barrels through the first 11 months of this year, according to the National Statistical Office. All of Mongolia’s crude is exported to China.

The 20-year loan will have an interest rate of 1.75% and principle payments will be waived during the five years, according to the April statement.

Mongolia imported 346,500 tons of gasoline worth $172 million and 479,800 tons of diesel worth $219 million in the first 11 months of this year, according to the NSO. More than 97 percent of the petrol and diesel was imported from Russia.


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