Daily Business News Mongolia

As our reader well aware that last week, during the presentation at the Ministry of Mineral Resource and Energy, the refinery project was presented to media. Projected to be built in Darkhan-Uul aimag, the refinery will be managed and built by “Mongolsekiu” LLC. Henceforth, Mr. T.Namjim, the director of “Mongolsekiu” LLC, was interviewed by us.

Q: We have been talking about having our own refinery in Mongolia for long. But nobody took the challenge and worked to realize it. When did you see this opportunity can be real?
T.Namjim: First, this idea hit me in September 2005. At that time, there was an article in newspapers of China, regarding the decision of three Chinese companies to build refinery in Mongolia. I thought that why these Chinese companies are deciding sovereign and independent Mongolia’s faith. On November of 2005, I was called back to Mongolia to receive the State Honor for my work of “the Mongolian economy; past, present and future”. During the ceremony, I shared my idea that hit me two months ago. At that time, Mr. Su.Batbold was the Minister for Trade and Industry. Mr. President and Mr. Su.Batbold both liked the idea and expressed that Government can support it. Shortly after this meeting, I received an official letter, to support this project, from President’s Office and Ministry. This was the beginning of the implementation of my idea, by starting talks with “Toyo Engineering” LLC and Japan International Cooperation Bank in the mid of 2006.

Q: Are these organizations and institutes well known in Japan?
T.Namjim: Japan International Cooperation Bank (JICB) is the bank of Japanese Government. This bank issues soft loans with longer terms around the globe. ”Toyo Engineering” has been implementing 1550 projects in over 50 countries in the last 40 years. 400 of them were on oil product refinery and oil and chemical factories. It is said that one of the top three company in its sector. In 2007, during the President’s visit to Japan, I signed a MOU with Mr. Marukawa, the president of “Toyo Engineering” company.

Q: On behalf of the Mongolian side, “Mongolsekiu” signed the agreement? What is the meaning of this name?
T.Namjim: In order to sign an agreement, there must be legal entity from the Mongolian side, so I established this company and named it as “Mongolsekiu” or Mongol oil, literally.

Q: What will be the production capacity of this refinery? Can it supply the demand of Mongolia?
T.Namjim: Our refinery will process 2 million tons of crude oil. It will process 5900 tons of crude oil and 44 thousand tons of barrel liquid fuel. It also produce oil fuel.
Q: Will it be enough for our consumption?
T.Namjim: Mongolia’s consumption in year 2007 was 750 thousand tons of liquid fuel and this consumption will be 10700.000 tons in year 2017. So this consumption will be covered only by our refinery. In fact, the minimum capacity of refinery must be 2 million tons per year, in order to produce quality products. In one word if produce less than that it will not be profitable.
Q: So what types of liquid fuel will be produced?
T.Namjim: 150 thousand tons of A-80, 445 thousand tons of A-92, 35 thousand tons of A-95 and A-98 and 1.2 million tons of diesel fuel and 60 thousand tons of aircraft fuel. Also 30 thousand tons of oil fuel for power stations and 105 tons of oil coke for smokeless fuel and Darkhan metallurgy factory.
This refinery will be equipped with the most up to date facilities of the best technology. It will consist of 14 different sections such as vacuum refining equipments. There will not be toxic contents and heavy metals such as cadmium and lead in our products. Sulphur content is 0.01% and it is over 30 times lower than liquid fuel from China and Russia. It can be understood that it is twice lower than those in USA. We are focusing on the environmentally friendly products.
Q: When the construction work will begin? How many people will be employed after the commencing its production?
T.Namjim: Research study and feasibility cover many areas and issues such as where to install, when to start construction, how many workers it will have and how many of them will be trained in Japan and so on. Construction work will begin June 2009 and will be completed in spring 2012. Those experts, who worked in Sakhalin, were invited to take part in the feasibility study team. 600 people will work in the refinery factory and 406 skilled workers will be trained and 48 engineers in Japan, 220 in Mongolia. Factory will operate 24 hours in 4 shifts and 333 days a year.
Q: Why Darkhan was chosen?
T.Namjim: Infrastructural in Darkhan area is highly developed and the refinery needs 21 megawatt electricity and it can be supplied from Darkhan Power Station and Galuut Nuur power Station from Russia. Factory will use 200 tons of water per day, but Darkhan supply is already exceeded in this part. I think that choosing Darkhan is very wise decision. Japanese experts were praising this decision.

Q: From where the crude oil will come to Mongolia? Does importing crude oil from Kazakhstan connect with this refinery?
T.Namjim: Yes. President of Mongolia initiated several talks with Kazakhstan regarding importing oil from Kazakhstan and it will start to ship at the beginning of year 2012. Kazakhstan exploits 60 million tons of crude oil and it uses 15 for its supply. When we buy, it will increase its production up to 90 million per year.

Q: The issue of transporting this crude oil from Kazakhstan is critical? Will Russians try to intervene?
T.Namjim: Triple sided agreement is required when we talk about shipment issue. Russian will not put obstacle. If Russia wants to join to WTO, then it cannot impose hindrance in this issue. We buy liquid fuel from “Rosnefti” But we will deal with its railway companies.

Q: What will be the reaction of petrol importing companies of Mongolia?
T.Namjim: They can buy it without any price pressure and transportation. We will sell our product with wholesale price and they will retail our product.

Q: Will you deal with retail business? Will you involve in setting market price on petrol?
T.Namjim: We will process crude oil only and produce liquid oil products. Market mechanism is required here. Also I think there must be some Government involvement in setting price.

Q: Once we produce petrol in Mongolia, will it be cheaper than now?
T.Namjim: Of course, when we produce in Mongolia, the price will decrease. Now a barrel crude oil is 74 US$. Our factory will extract 88% of it. But in China and Russia they extract only 50% of oil. Price will surely be decreased by 10-15%.

Q: Do we have a chance to exploit oil in Mongolia?
T.Namjim: According to the study of MRPAM, Mongolia can exploit 2 million tons of crude oil per year and it will be 500 thousand tons by 2015. It is good news for both of us.

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