The Mineral Resources Authority of Mongolia (MRAM) and Smart Oil Investment of China signed a production sharing agreement for oil exploration site Ergel 12 on Friday.
A government tender for an oil explorer at Ergel 12, which stretches 11,630 km, in Dornogovi Province’s Khatanbulag, Khuvsgul and Mandakh soums was announced in 2014, and Smart Oil Investment of China was selected.
The company received an eight-year exploration license. During that time, Smart Oil Investment plans to conduct gravity and magnetic exploration, 2D and 3D seismic surveys, and drill eight exploration and evaluation holes for 35.5 million USD. The company said that it will spend one million USD for land reclamation.
During the agreement signing ceremony, Acting Director of the MRAM B.Baatartsogt said, “Signing an agreement with a company that has resolved investment issues and ready exploration plans in a time when the nation’s foreign investment and exploration have slowed down is vital in intensifying oil exploration in Mongolia.”
He underlined that the agreement is a big step for attracting more foreign investors to the nation’s oil sector.
In accordance with the production sharing agreement, Smart Oil Investment will give 40 percent of oil explored to the government of Mongolia. The MRAM noted that Mongolia’s stake may increase to 70 percent if the company’s oil exploration is higher than 15,000 barrels per day.