Oil refinery construction project: Mongolia to no longer be dependent on gasoline imports

The Mongol Messenger
2022-05-23 12:50:59

Ulaanbaatar /MONTSAME/. With aims to establish an oil refinery based on available supply of commodities, meet domestic demands for gasoline, and launching domestic production, a comprehensive construction project is being implemented in Altanshiree soum, Dornogobi aimag - the project of Mongol Refinery State Owned LLC.

Planned to be put into operation in 2025, the construction works were recently launched. Its detailed feasibility study was approved by the Mineral Resources Professional Council at the Ministry of Mining and Heavy Industry on November 15, 2018. 

A bill on supporting the oil refinery was developed by a working group consisting of officials and representatives from the Ministry of Justice and Internal Affairs, Ministry of Finance, Ministry of Mining and Heavy Industry, Mineral Resources and Petroleum Authority of Mongolia, and Mongol Refinery State Owned LLC, which was discussed at a Cabinet meeting on December 30, 2020. Following this, the Standing Committee on Industrial Policy formed a working group, and corresponding bills were approved at the parliament’s plenary session on January 29, 2021. The Government also approved the regulations on state support for the oil refinery on August 11, 2021. It was through all these stages that the legal environment was created for an oil refinery to be established in Mongolia. 

Non-technological facilities and structures

The first stage of the refinery’s construction consists of non-technological facilities. The first engineering-procurement – construction (EPC-1) contract was signed with the company, ‘JMC Projects India’, in October 2020, and its works launched in January 2021.

In preparation for the construction to be carried out for non-technological structures, facilities, pipelines, and the site, domestic resources were utilized in connecting the area to railroad, autoroad, and power lines. 

Within its frames, the Ministry of Defense, Ulaanbaatar Railway JSC, and the National Power Transmission Grid have handed over a 17.5 km-long autoroad, 27 km railroad, 3.7 km junction, concrete bridge, tunnel, and 18.6 km-long 110kW overhead power lines as well as a 110/10kW substation to the State Commission. 

On top of this, the first apartment complex for housing 550 households is currently being built in Sainshand for the refinery’s workers. Once the apartments are commissioned, it is planned to be expanded into a microdistrict of comfortable apartments with modern solutions. During the entire duration of the oil refinery’s construction, around 8 thousand workers will be working at the site. 

Crude oil pipeline

On March 1, 2021, Mongol Refinery State Owned LLC had a request for expression of interest for the tender to select the contractor for engineering, procurement and construction plus financing (EPC plus F) of the project to construct a crude oil pipeline published on the website, Pipeline & Gas Journal, announcing the tender internationally. About 20 foreign and domestic companies expressed their interest in participating in the tender, and the process to select the contractor was completed on October 20, 2021. 

As the Chinese state-owned NORINCO International Cooperation was selected through the tender, a cooperation agreement was signed by State Secretary of the Ministry of Mining and Heavy Industry G.Nandinjargal, CEO of Mongol Refinery State Owned LLC D.Altantsetseg, CEO of Erdenes Tavantolgoi JSC B.Gankhuyag (as the project financing body), and General Manager at NORINCO International Cooperation Zhou Dian Bin in April 2022. 

With financing of USD 388 million from Erdenes Tavantolgoi JSC, the crude oil pipeline will pass through nine soums of three aimags, stretching for 530 km. 

Per the Cabinet’s resolution on issuing oil exploration area in the Tamsag basin to the Mongol Refinery company, an oil pipeline will be constructed from Matad soum, Dornod aimag to the oil refinery site in Altanshiree soum, Dornogobi aimag. It is planned to be constructed in three years, before the oil refinery is put into operation. 

As the pipeline will be constructed deep underground, it will not only be the first of its kind in Mongolia for fulfilling the roles of storage, transport method, and infrastructure, but also save power costs. 

A new industry for the country

Works for the construction of industrial facilities (EPC-2,3) and deep-processing facility (EPC-4) will be carried out in phases. The EPC-3 contract includes constructing the refinery’s own power plant based on locally produced fuel, while EPC-4 will include acquiring the corresponding rights and permissions from large-scale companies in the petrochemical industry. 

However, it should be noted that the oil refinery would not be considered large according to international standards. Thus, there have been certain cases where companies refused to participate in a “small” project. Despite this, the team working at Mongol Refinery State Owned LLC has been resolving the issue. For instance, the company has begun to sign license agreements as the selection process has been completed. Last month, Mongol Refinery signed a license agreement with Axens Solutions for its sulfur recovery unit. A license and engineering agreement for four of the deep processing units at the oil refinery has also been signed with Honeywell UOP. 

Socio-economic benefits of the oil refinery

Firstly, once it becomes possible for Mongolia to produce its own gasoline and oil products at the oil refinery in Altanshiree soum, the country will no longer be dependent on imports. In other words, the country will increase its economic independence in the region. 

Furthermore, the foundations for the petrochemical industry will be laid out with the introduction of the technology. Alongside making contributions to the state and local budgets, the refinery will not only create some 600 job opportunities, but also significantly increase the number of jobs available in the industry indirectly. 

As the outflow of foreign currency decreases, foreign exchange rates will stabilize. And as a result, Mongolia’s GDP is estimated to grow by over 10 percent. In this sense, the project for the construction of an oil refinery in Altanshiree soum could be considered as one of the main projects to boost the country’s development. 

Processing capacity: 1.5 million tons of crude oil per year
Location: Altanshiree soum, Dornogobi aimag
Sources for crude oil: Toson Uul XIX, and Tamsag XXI sites
Product quality: MNS & EURO V
Annual operating hours: 8,000 hours
Deep processing technology: Hydrocracking, Visbreaking
Power source: TPP 35 MW/h

The oil refinery will produce: 
• 339 thousand tons of gasoline,
• 824 thousand tons of diesel,    
• 80 thousand tons of aviation fuel, 
• 43 thousand tons of liquefied gas,
• 47 thousand tons of stove fuel.

By G.Erdenebat

The article was published in the Mongol Messenger weekly newspaper on May 20.

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