A plan to develop oil refining capabilities could see Mongolia enhance its energy security, curb its energy import bill and broaden the scope of its manufacturing industry.

The proposed refinery, to be located in the Sainshand soum (district) in the province of Dornogovi, is forecast to cost around $700m, with a further $264m to be spent on pipelines needed to bring crude to the plant from local fields, Oxford Business Group reported on March 7.

According to the proposal, which was approved by the Cabinet at the end of last year, the facility will have a yearly processing capacity of 1.5m tonnes. Its output is projected to comprise 560,000 tonnes of petrol, 670,000 tonnes of diesel and 107,000 tonnes of liquefied natural gas.

This should meet all of Mongolia’s petrol and diesel needs for the immediate future, with a heavy emphasis on diesel production reflecting a reliance on heavy-duty vehicles, particularly in the extraction sector, which accounts for close to 20% of GDP and more than 80% of exports.

In late December the government announced it was seeking approval from the Import-Export Bank of India to utilise a $1bn loan for the construction of the refinery and associated infrastructure.

The credit, agreed upon last year during a visit to Mongolia by Indian Prime Minister Narendra Modi, was extended to help develop the country’s rail network and general infrastructure.