The Cabinet’s ministers voted on Wednesday to pursue negotiations to use a one billion USD loan from India to build a petroleum processing factory in Sainshand soum in Dornogovi Province.

According to the Cabinet, the decision to build the factory in Sainshand soum was based on the infrastructure, logistics, and its proximity to oil wells.

Preliminary estimates put the cost of opening the refinery at one billion USD, with 700 million USD to be spent on the refinery and 264 million USD to be spent on a petroleum pipeline. Early studies estimate the refinery could generate annual revenue of 1.2 billion USD, and net profit would be 43 million USD.

The plan for the refinery includes the capacity to process up to 1.5 million tons of petroleum annually, producing 560,000 tons of gasoline, 670,000 tons of diesel fuel, and 107,000 tons of liquefied gas meeting Euro 4 and Euro 5 emission standards.

Studies conducted estimate that the proposed factory could contribute to a 10 percent increase in the country’s GDP and a twofold increase in the revenue generated by the natural resources processing sector. Economists predict that the investment could contribute to increasing the flow of foreign currency and help stabilize Mongolia’s macroeco- nomic outlook and monetary policy. Some analysts forecast that the factory could result in a one billion USD decrease in the import of petroleum and reducing spending on foreign fuel by 20 percent, which could result in an 18 to 25 percent decrease in the MNT’s currency exchange rate against the USD.

The Cabinet believes that the refinery could create around 600 new jobs and pay more than 150 million USD a year in state and local taxes. The Finance Ministry suggests that a total of 30 factories, including tire, rubber, plastic, cosmetics, and pharmaceutical factories, could be established with direct access to a domestic refinery.

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