Mongolia to keep importing fuel from Russia after launch of refinery - govt

ULAANBAATAR. Sept 4 (Interfax) - Mongolia intends to expand cooperation with Russia in the fuel and energy sector, even after the launch of the oil refinery that is being built in the country, the Mongolian Cabinet's press service said, citing Prime Minister Nyam-Osoryn Uchral.

"We've been importing gasoline and fuel from Russia on special preferential terms and under intergovernmental agreements for many years. We consume 3 million tonnes of fuel annually, 97% of which is imported from Russia. Despite the difficult situation [on the fuel market], we would like to express gratitude to Russia for stable supplies of gasoline and fuel and help at this difficult time," the prime minister said after speaking at the plenary session of the Eastern Economic Forum (EEF).

Demand for fuel and lubricants in Mongolia is growing as the real sector of the economy develops, he said. The country's domestic consumption of oil products is expected to grow to 4 million tonnes by 2028.

"After the oil refinery is put into operation, it will meet 30% of our total needs. Demand will grow as new enterprises are put into operation. Therefore, we will steadily expand cooperation with Russia in the fuel and energy sector," Uchral said.

Demand for fuel in Mongolia surged by two to three times amid peak tourist activity, farm work and the situation on the Russian fuel market. The country's authorities said that the agreement on trade in oil products with Russia remains in force unchanged.

At a meeting between Uchral and Russian Energy Minister Sergei Tsivilev at the EEF, the parties confirmed their commitment to implementing the oil product trade agreement in the previous amounts.

Nonetheless, in order to prevent fuel shortages, Mongolia is diversifying its supply sources. It has signed an agreement with South Korea for the delivery of at least 50,000 tonnes of fuel per month, and made its first ever purchase of jet fuel from China in the amount of 1,000 tonnes. The country is also considering increasing the share of oil product imports from China to 30% from 5%, as well as additional imports from Kazakhstan and Belarus.

Construction of Mongolia's first oil refinery, with capacity to produce 1.5 million tonnes of oil products per year, has been underway in the Altanshiree district of Dornogovi province in the southeastern part of the country since 2018, with India acting as the investor. The Exim Bank of India provided $1.7 billion for the project and construction is being carried out by Engineers India Ltd.

Construction of the refinery was initially scheduled to be fully finished in 2027, but at the beginning of August it was reported that completion would be pushed to 2028, as the facility is only 60% finished. The project was slowed by a number of financial and organizational delays, which the country's authorities say have already been resolved. Work on the project has been stepped up recently due to the increased instability on the global and domestic fuel markets, which has pushed the authorities to accelerate import substitution.

Once the refinery reaches full capacity, it will produce more than 300,000 tonnes of gasoline and 800,000 tonnes of diesel fuel per year, which will enable the country to cut spending on imported fuel by 50%.