Mongolsekiu and Toyo Engineering to Build Refinery in Mongolia

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Researched by Industrial Info Resources (Sugar Land, Texas)--Mongolsekiu LLC (Ulan Bator, Mongolia) and Toyo Engineering Corporation (TYO:6330) (Tokyo, Japan), announced that the companies are jointly setting up Mongolia's first oil refinery with a total capacity of 44,000 barrels per day (BBL/d) at Darkhan-Uul aimag near the Russian border. Toyo is a global technology leader in the fields of oil, power generation, gas, alternative clean energy, nuclear energy and petrochemicals. The Japanese firm has considerable expertise in the field, having implemented 1,550 projects in more than 50 countries in the last 40 years.

The total cost of the project is estimated to be around $1.2 billion. Toyo will have a 60% stake in the joint venture with 40% held by Mongolsekiu. The refinery project is expected to be primarily backed by Japan, with the costs largely underwritten by the Japanese government and the Japan Bank for International Cooperation (JBIC) (Tokyo, Japan). JBIC is a wholly owned financial institution of the Japanese government that strategically promotes and finances overseas development projects in the field of natural resources that are important to Japan.

Construction of the refinery is slated to begin in June 2009 with a pilot plant expected to be commissioned by the first half of 2010. Toyo and Mongolsekiu have submitted project plans to the Mongolian mines and energy ministry for approval to construct the refinery. The entire refinery is likely to be operational by 2012. The refinery will require 21 megawatts (MW) of power, which will be supplied by the Darkhan power station and the Galuut Nuur power station in Russia. The only challenge during construction will be the availability of water during winter months. Otherwise, the Darkhan region has adequate water resources to supply about 48,000 gallons of water every day to the plant. The plant is designed to be environment-friendly, consisting of 14 different sections including vacuum refining equipment. Products to be produced in the plant will be non-toxic in nature with sulfur content of around 0.01%, which is considerably lower than liquid fuel from China and Russia.

The refinery will have a capacity to process about 42,000 BBL/d. With local consumption currently at about 16,000 BBL/d, the projected consumption for 2017 is about 22,000 BBL/d. When the refinery begins production, it will make the country self-reliant in meeting domestic fuel demand for petroleum, diesel and aircraft fuel. It will also significantly slash the import of petroleum products for local consumption.

Crude for the project will be imported from Kazakhstan through rail and pipe networks in 2012, when the refinery starts production. Kazakhstan currently produces 1.28 million BBL/d of crude, out of which 321,000 BBL/d goes to local consumption. Once Kazakhstan starts exporting crude to Mongolia, it will enhance its crude production to 1.93 million BBL/d. Mongolia is also considering starting crude oil exploration domestically in order to produce up to about 42,000 BBL/d, with a target of producing up to about 10,000 BBL/d by 2015.

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