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Additional loan agreement supported for oil refinery project www.ubpost.mn
On January 13, the Parliamentary Standing Committee on Economy discussed and supported the draft loan agreement between the government of Mongolia and the Export-Import Bank of India to secure additional funding for the country’s oil refinery project.
The proposed loan, totaling 462.2 million USD, will supplement the original 1.2 billion USD loan provided by India for the construction of the refinery.
During the discussion, Minister of Industry and Mineral Resources Ts.Tuvaan emphasized that the additional financing is crucial for ensuring the timely completion and operational launch of the refinery. The supplemental loan will maintain the same favorable terms as the original loan, including a 0.5 percent service fee, a 0.5 percent capital reserve guarantee fee, a five-year grace period, and a 20-year repayment term.
“The feasibility study for the refinery has been updated, reflecting increased costs due to the COVID-19 pandemic, rising global equipment prices, and enhanced output targets for jet fuel and high-octane gasoline. The revised project cost is now 1.7 billion USD, Minister Ts.Tuvaan explained.
During the session, lawmaker O.Batnairamdal expressed concerns about the impact of the additional loan on the project’s feasibility and the state budget. He noted that the 2025 budget had been approved without a deficit, which required cuts to the investment budget, including funding for the refinery.
Minister of Finance B.Javkhlan addressed these concerns, stating that the refinery is among the government’s 14 mega projects with the earliest potential to generate returns. “If the refinery becomes operational, it will reduce Mongolia’s annual oil import bill by 1 billion USD, providing significant economic benefits,” he said. He further noted that the project aligns with existing budget rules and will require a special provision for additional spending.
The success of the refinery depends on securing 1.5 million tons of crude oil annually, primarily from PetroChina Dachin Tamsag, which currently produces only 552,000 tons. Minister Ts.Tuvaan reassured parliament that under a production sharing agreement, PetroChina has committed to selling crude oil to Mongolia at market prices once the refinery becomes operational.
The standing committee supported the loan agreement, and the proposal is set to be submitted to parliament for ratification. If approved, the loan agreement will be signed on February 5, with the refinery expected to begin production in May 2027. The refinery project, Mongolia’s largest infrastructure initiative, represents a strategic effort to reduce reliance on imported oil and foster domestic energy production, contributing significantly to the country’s economic growth and energy independence.
Published Date:2025-01-16
