Petroleum refinery certain to come up before 2014
Petroleum Authority Chairman D.Amarsaikhan recently told citizens of Zuunbayan in Dornogobi that exploration for petroleum in the area was very important for the country. The people had wanted to know how a Chinese company, Dongsheng, keeps exporting 40-60 trainloads of petroleum every week to China. Amarsaikhan said the company discovered petroleum in Zuunbayan in 1994 and now works under a product sharing agreement with the Government. It has produced 1,790 million barrels of oil until August, 2010, and exported 1,700 million barrels of it. It has so far recovered USD14 million or 8% of its outlay, and paid MNT33 billion to the Government.
Under the terms of the product sharing agreement, the companies are responsible for 100% of the expenses and bear all risks. In case oil is found, they pay a flat rate as production royalty. A company is allowed to recover its costs, and shares profits with the Government. Usually the Government gets 40% in the first stage and its share increases with increase in daily output, and finally becomes 60%.
Seven petroleum companies are now working on exploration and production in six territories in Dornogobi. More drilling by Dongsheng is revealing more occurrences. Altan Tengis, another Chinese company, has discovered a fresh deposit. A processing unit with a minimum capacity of 1 million tons is going to come up, to meet Mongolia’s demands fully.
Asked why the producing companies should agree to offer the oil for local processing, instead of exporting it as now, Amarsaikhan explained that the product sharing agreement says that in the event of a processing plant coming up in Mongolia, the companies would pay the country its share, not in cash but in an equivalent quantity of crude. Mongolia’s share of the crude produced will be enough to meet the demands of the processing plant. It will require a minimum of 3-4 years to build and the cost would be around USD400 million.
Under the terms of the product sharing agreement, the companies are responsible for 100% of the expenses and bear all risks. In case oil is found, they pay a flat rate as production royalty. A company is allowed to recover its costs, and shares profits with the Government. Usually the Government gets 40% in the first stage and its share increases with increase in daily output, and finally becomes 60%.
Seven petroleum companies are now working on exploration and production in six territories in Dornogobi. More drilling by Dongsheng is revealing more occurrences. Altan Tengis, another Chinese company, has discovered a fresh deposit. A processing unit with a minimum capacity of 1 million tons is going to come up, to meet Mongolia’s demands fully.
Asked why the producing companies should agree to offer the oil for local processing, instead of exporting it as now, Amarsaikhan explained that the product sharing agreement says that in the event of a processing plant coming up in Mongolia, the companies would pay the country its share, not in cash but in an equivalent quantity of crude. Mongolia’s share of the crude produced will be enough to meet the demands of the processing plant. It will require a minimum of 3-4 years to build and the cost would be around USD400 million.
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