Mongolia is located between China and Russia and is approximately twice the combined size of the United Kingdom and France. Mongolia’s terrain can be divided into desert, steppe and mountain. Climatic extremes are the norm, with temperatures ranging from minus 30 degrees centigrade in winter to plus 40 degrees centigrade in summer.
The Mongolian population is approximately 3 million, with approximately 1 million living in the capital Ulaanbaatar. Its religious demographic is predominantly Tibetan Buddhist. Mongolia is a member of the UN, its troops having participated in peacekeeping activities in Sierra Leone, Kosovo, Afghanistan and Iraq. In 1997, Mongolia became a member of the World Trade Organisation.
Following the withdrawal of economic support from the former Soviet Union in 1989, Mongolia moved to a free-market democracy in 1990, with the first multi-party elections taking place in 1992. In line with the 1992 Constitution, Mongolia is a parliamentary democracy with a directly elected head of state, the President. The Parliament has 76 seats. Since 1990, Mongolia has had five parliamentary elections and five presidential elections to date.
Economic performance has improved significantly in recent years. GDP growth was 8.6 per cent. and 9.9 per cent. during 2006 and 2007 respectively, supported by high international mineral prices and increased foreign investment in the mineral and petroleum sectors. In 2007 the mining sector accounted for one third of GDP. In 2008, Mongolia’s GDP was estimated at US$5.258 billion, with an average GDP per capita of US$1,980.
Standard and Poor’s foreign currency sovereign debt rating in Mongolia was BB-. This primarily reflects the country’s declining debt burden and the mining industry’s prospects. In particular, a Standard and Poor’s report dated December 2006 cites Mongolia’s solid growth projections, based upon the expected large expansion of production capacity by several major resource companies. In September 2007, Fitch granted a foreign currency sovereign debt rating of B+ and Moody’s gives a foreign currency sovereign debt rating of Ba2 for the country.
Oil in Mongolia
Mongolia has an international standard regulatory framework for the oil sector in place and essentially unchanged since 1991. Mongolia has 27 Petroleum blocks: 18 are under current Production Sharing Contracts and 5 are under application for PSCs.
The presence of hydrocarbons has been recognised since the Soviet era, and small scale exploration in the 1950s and 1980s demonstrated the possibility of oil in Mongolia. Reports from the early 1990s, by Western Companies such as Phillips Energy and BP, confirmed the earlier Mongolian/Russian work. A modern, international standard Petroleum Law was put in place in 1991.
Petroleum explorers and producers such as SOCO International from the United Kingdom, Roc Oil from Australia, and PetroChina and Dongsheng from China actively explored from the mid 90’s.
Petroleum production in Mongolia is presently sourced from two areas. The Zuunbayan area in the south-east Gobi Desert has exported 185,000 barrels of oil to date in 2008. The majority of Mongolia’s production is from the Tamtsag Basin, on Block XIX, immediately north of Petro Matad’s Block XX. Block XIX’s contractor, PetroChina, directly exports their production into China via road, and it is refined in Inner Mongolia.
Production figures and estimates:
