Source: Frontier Securities                        Date: 21 June, 2011

Facing flak from the media and some MPs for “deliberate and criminal inaction” in not setting up an oil refinery in Mongolia, Minister of Mines and Energy D.Zorigt has reported to the Government that Mongolia’s confirmed crude reserves do not justify investment in a refinery with production capacity of 2mtpa. A more viable option is to build a mini-refinery to supply three eastern provinces. This can be constructed on a PPP basis and can be commissioned within 18 months of starting work.

The Chairman of the Petroleum Authority, Mr.  D.Amarsaikhan, said at the same meeting of the Government that confirmed crude reserves were available only in July 2010. He estimated that 1 million tons of crude would be extracted by 2015. He had issued a very optimistic statement to the media on February 24 last year that “geological reserves of 119.02 million tons (892.65 million barrels) of crude and 2.5 billion cubic meters of natural gas have been found by Daching Tamsag Mongolia in the Tamsag valley of Dornod province. This is the minimum confirmed reserve, amounting to 0.12 percent of world reserves and making Mongolia No.33 in the world and a major player in the petroleum industry.”

A representative of the Industrial Corporation of Mongolia reports that they have been cooperating with Thyssen for two years on a CTL project and a feasibility study was prepared in 2010 for a plant to produce 1 million tons of gasoline, diesel and liquid gas per annum. Its site could be Baganuur,Shivee Ovoo or Tugrug Nuur and total costs would amount to USD1.5 billion. Mr. Zorigt expressed full support for the project.