Ch.Khashchuluun: Oil shale can attract investments equivalent to that of Oyu Tolgoi’s

Trans. by B.DULGUUN

 Executive Director of the Mongolia Oil Shale Association (MOSA) and distinguished economist Ch.Khashchuluun gave an interview about Mongolia’s oil shale opportunities and potentials to grow.

Mongolia’s total oil shale reserve is estimated to be 700 billion tons. Is it accurate? Does Mongolia have internationally approved oil shale mines?

The 700 billion tons of reserve is a pre-estimation calculated after four researches. Several works are being done for clarification. Foreign and domestic companies are actively exploring in central and eastern regions. Since legislations were approved just before Naadam Festival, exploration work is gaining momentum now. The pre-estimation will become an accurate number if exploration work is intensified from all sides in the future. This number is reasonable to a certain degree as the government researched oil shale reserve in the 1980’s through special programs. There are two technologies for utilizing oil shale. One digs up a big hole like coal mining. The other is a suction technology used to extract liquid oil shade, similar to crude oil mining.

Currently, verifying work for whether technologies are compatible, whether resource amount is able to reach investment amounts and etc. are being executed. Exploration intensified a bit in the last two years. Related law approvals became the gateway. I’m confident that Mongolia will reach certain outcomes through exploration. The MOSA is planning to do a survey nationally in Mongolia but no explorations. We discussed the integration of previous exploration work results with the Petroleum Authority of Mongolia. We can present it to the public if the government provides financial support. This will become a huge advance for attracting investors. The U.S. government studies world oil shale reserves annually. Two of Mongolia’s reserves were recognized by them, namely one in Dornogovi Province and another in Dornod Province. Mongolian geologists are aware of reserves in Tuv, Khentii, Dornogovi, Dundgovi and Uvurkhangai Provinces. Dual exploration work has just begun.

 Currently, which companies are interested in investing?

For oil shale, representative of France and the world’s largest oil and gas company, Total S.A, have met and negotiated with Mongolia’s Ministry of Mining several times. They expressed their interest to do a national oil shale study; basically to do exploration.

Genie Oil has reached stages for exploration work. Mongolian companies are also doing explorations. Khuut deposit was recognized to have considerable amounts of reserves and was considered feasible for extraction. Western companies are interested in finding new deposits. Russian and Estonian businesses came to Mongolia and conveyed interests to cooperate on oil shale matters.

Russia has been using oil shale since 1940 so they have excellent technologies and information. Russia was able to research Mongolian reserves very well in the 1940’s. Estonia is rich in experience since they operate four power stations with oil shale. Since Mongolia has a lot of coal, we don’t give much credit to oil shale but we should learn from Estonia’s practice. We can’t deny that it may be more productive and affordable. Genie Oil’s technologies are more advantageous for petroleum and diesel production instead of oil shale. Their pilot plants are located in Israel and America. Associated Mongolian experts and officials and the Ministry of Mining probably visited the sites. Overall, Mongolia’s getting many new opportunities. World countries started focusing on oil shale. China announced support of oil shale exploration and production. Mongolia even established a national institute for this sector.

 Genie Oil commented that oil from Mongolia’s oil shale is as good as Arabian oil. Internationally, how good is Mongolian shale oil quality?

Oil shale is a material similar to raw coal. The quality is assessed with the chemical product percentage ratio of soil and oil. A study was done for Khuut deposit and concluded to build a plant. Mongolian companies are interested in conducting this work. Genie Oil is highlighting outputs that contain petroleum product. Laboratory studies proved the deposit has high quality oil shale. Liquid parts are processed into petroleum and a bit heavier parts into diesel fuel. Experts said cars turn on immediately when heavier parts are infused. It seems that something amazing is about to happen.

 At the international investors’ forum Oil and Oil Shale Mongolia 2014, held in Ulaanbaatar, many people highlighted oil shale as the most attractive sector for investors. Exactly how much investment can Mongolia get?

Investors said that it’s possible to attract three to four billion USD, meaning it’s possible to get investments equivalent to the amount of Oyu Tolgoi’s. Before pulling foreign investments, we must consider what product would come out of oil shale. Price of fuel imported from foreign countries cost almost a billion USD. Certain amount of this money can be kept in the country by utilizing oil shale. The second advantage is that it’s a comparatively environment-friendly method. It doesn’t need big pits and there will not be explosions. It will not be burnt after getting it above the surface. Thirdly, the nature will remain in its untouched state even when oil shale is used. Production will be done under 300 to 400 meters below the ground.

Since there is abundant oil shale reserve, it can be used for various usages. Germans use it for materials used for building roofs. Mongolia can do the same. How oil shale is used depends on the private sector and government policy. It’s possible to use it to operate power stations, make construction materials, or for fuel production. Mongolians throw away oil shale as garbage. There’s a big pile of it beside Baganuur mine. That pile should be used for something beneficial. Mongolia should work towards providing fuel domestically. This will save an immense amount of money.

Oyu Tolgoi’s investment is said to be four billion USD. Mongolia imports fuel costing a billion USD annually. If oil shale is used as fuel, Mongolia will save more money than Oyu Tolgoi’s investment within five years.

 Are there any legislation issues for countries interested in investing in oil shale?

Investors are being careful. Since last year, the investment environment for mining sector has been improving. Two major laws were approved. First is the Petroleum Law. Every issue including how every type of energy source can be used, who can use it, and what will be monitored are specifically stated. Investors are able to know who they need to address, what procedures to follow for permission, and in what conditions permissions aren’t granted. This is a big advantage.

The second is the Investment Law. After discovering a deposit, you can mine it. Working conditions and tax environment has become specific. There are two articles investors are cautious on. In the article on royalty payment, it states five to 15 percent. It isn’t clearly defined.

 Are there any issues for selling fuel?

Sales are facing a set of issues. It’s given that domestic fuel production will be supported with government policy for coal liquefaction, coal gasification and oil shale production. The uncertainty lies on what would happen if prices of petroleum and diesel coming in from foreign countries suddenly drop when Mongolia decides to sell [petroleum]. The state gets tons of things done after giving specific orders and large sum of funding. Later, they encounter issues concerning countermeasures if petroleum product prices suddenly dropped. This is a strong factor creating vague conditions for investors. The current price increase isn’t good for the fuel sector. If prices decrease unreasonably it will become challenging for investors to estimate project revenue.

The Central Bank of Mongolia is executing the fuel price stabilization program. Some aspects are skeptical. A positive point is that it’s stabilizing fuel price. If fuel price hadn’t been stabilized, inflation would’ve reached 20 to 30 percent by now. It’s crucial to continue preventing fuel price increase and keep it stable. In such circumstances, it’ll be possible to make investment estimations and calculate its revenue. This condition will widen investment opportunities.

You mentioned about actively working on using American and Chinese oil shale. Estonia burns its oil shale for energy and makes considerable revenue from oil shale exportation. Which other countries are focused on oil shale?

Looking at the global approach, developing countries are making a lot of investments into oil shale. For example, Egypt and Jordan. Lately, Egypt has been working intensively on licensing oil shale deposits and establishing Use Agreements. Particularly, Arabian countries are paying a lot of attention to oil shale. Saudi Arabia is the world’s dominant oil exporting country. They granted the first two oil shale licenses. They’ve begun allocating deposit fields. Oil reserves are nearing depletion. It’s said that reserves will completely exhaust in 20 to 30 years. In response, these countries are trying to use oil shale. Egypt and Jordan originally don’t have oil reserves. Israel has exceptional oil shale technologies and is beginning to build industries. The U.S. is utilizing oil shale and is working towards stopping oil shale exports by 2020. They’ve announced to completely supply fuel domestically. Poland and Germany has been contributing greatly to oil shale production and use since the 1940s. Estonia is a small country like Mongolia. Even so, it produces four times more energy than Mongolia. They produce energy with oil shale.

Mongolia has massive amount of oil shale reserves. We are gradually working towards using oil shale development. Compared to two years ago, that understanding about oil shale has flourished considerably. Compared to a year ago, legislations have been adopted and legal environment has opened. At this rate, possibly in a few years, Mongolia will use petroleum and diesel produced from oil shale and no longer fear of running out of fuel.


Source: http://dnn.mn/


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