Mongolia's maiden refinery facing delays, set to boost oil ties with India

Mongolia's maiden refinery project has been facing some delays and is expected to start operations only in 2028, three years later than the previous deadline, Indian government sources told Platts, part of S&P Global Energy, June 6.

The project, being set up in Mongolia with the Indian government's line of credit fund, would sharply reduce Mongolia's dependence on oil product imports and boost energy ties between the two countries, said sources familiar with the matter on the condition of anonymity.

The Mongol Refinery -- with a 1.5 million mt, or 30,000 b/d, crude throughput capacity -- is part of the Partnership Administration Initiative between the two countries. The project is being executed by Engineers India Ltd. (EIL), a leading project management consultant.

"We are expecting the refinery in Mongolia to now start operations by early 2028," an EIL official told Platts June 6.

The latest timeline is nearly six years behind the original completion deadline of 2022. The initial rescheduling was done following a disruption in project work due to the pandemic.

India had extended a $1 billion credit line to construct the greenfield project with the state-run Mongol Refinery.

The greenfield refinery is expected to reach 70% of its installed capacity after two years of operation, while the full run is expected after four years. The proposed Mongolian refinery will have a complexity index of 12, EIL officials told Platts last month.

Energy cooperation

EIL is an Indian public-sector engineering consultancy and technology licensing company that was set up to provide technology solutions for hydrocarbon projects. Over the years, it has also diversified into other sectors. EIL's business operations span the hydrocarbon value chain and diversified areas of metallurgy, infrastructure, biofuels, and green hydrogen.

In May, senior EIL officials visited Mongolia to review the implementation of the project.

The officials told Platts this week that the company is committed to successfully executing this government-to-government collaboration project of national importance, which would boost Mongolia's energy security.

"The project shows EIL's capability of executing challenging projects in diverse geographies and harsh climatic conditions. Despite these constraints, EIL, the executing contractor, and Mongol Refinery teams are making concerted efforts to ensure the timely and successful execution of this strategically important project," an EIL official said.

Mongolia imports diesel, gasoline, jet fuel, and LPG from neighboring countries.

The project aims to lower Mongolia's dependence on petroleum imports, said industry analysts, adding that India's move to provide soft loans to finance Mongolia's refinery plant highlights the strong relationship between the two countries.