September 06, 2020

Mongolia known as the Land of the Eternal Blue Sky with over 250 sunny days a year is the 18th largest and the most sparsely populated fully sovereign country in the world, with a population of around 3 million people. Mongolia is high, cold, and windy. It has an extreme continental climate with long, cold winters and short summers, during which most of its annual precipitation falls. January averages temperatures drop as low as -30 °C. A vast front of cold, heavy, shallow air comes in from Siberia in winter and collects in river valleys and low basins causing very cold temperatures. The geography the country is varied, with the Gobi Desert to the south and with cold and mountainous regions to the north and west. In 1921, Soviet Union’s All-union Foreign Trade Organization established its representative offices in Selenge, Baruunkharaa, Ulaanbaatar, Turt, Khatgal, Tsetserleg, Khovd, Undurkhaan, Bayantumen, Ereentsav and Tsagaannuurto start construction of petroleum stockpile facilities as well as gas stations. From 1928 to 1932 construction works have been completed and until 1941 the Organization supplied Mongolian machineries with petroleum products and lubricants. In 1923-1924 Mongolian fuel demand was 91 tons, in 1924-1925 it was 431 tons and during 1940s fuel demand was around 4000 tons.
Petroleum exploration in Mongolia began with the classification of Mesozoic and Tertiary sediments and the discovery of outcrop of oil-shale related to petroleum genesis during the geological research by American geologists H.Berkley and C. Morris in 1922-1923 in the Gobi region of the country. The existence of oil in Mongolia was presumed by American geologist D. Tenner in 1931, and the Zuunbayan oilfield in East Gobi was discovered by Mongolian geologist J. Dugersuren and Soviet geologist Yu. S. Jelubovsky in 1940.
Between 1947 and 1963, two small oilfields and 80 buried structures with possible oil potential were discovered during the petroleum exploration by former Soviet geologists in the southern, southeastern and eastern parts of the country.
In 1947, Mongolnefti trust was established and an oil refinery was built in Zuunbayan in 1950. However, due to several factors such as well pressure decrease, the fire accident that destroyed the refinery as well discoveries of giant oil fields in western Siberia of Russia, petroleum upstream operations in Mongolia was ceased in 1969.
Following the collapse of the Soviet Union in 1989, a wave of democratic reforms followed by political, economic and social changes, swept through Mongolia and subsequently, petroleum upstream operation has been recommenced in Mongolia.
In 1993, the first Production Sharing Contract (PSC) was signed with SOCO from the USA and the first exploration well of 3,000 meters depth was drilled a year later. In 1997, well 19-3 on Block XIX was recorded as the country’s first free flowing oil well. Soon after, oil was exported from Mongolia by trucks to China.
From 1993 to 2013, a total of 31,130 km of 2D seismic, 5,920 km² of 3D seismic, gravity survey covering 390,880 km2 area, 17,920 km of magnetic survey were conducted and more than 1,200 wells have been drilled. Investments totaling over USD1.5 billion were made in petroleum exploration in Mongolia by contractors during this time.
Since petroleum production re-started in 1998, a total of 35.5 million barrels of oil have been produced by the end of 2015.
In 1998, Zuunbayan oilfield, Mongolia’s first oilfield located in south-east Gobi now under PSC Block 97 began reproducing. Toson-Uul oilfield, PSC Block XIX, located in eastern Mongolia also started production in 1998. Since then oil production has been increasing each year, reaching a daily production of 24,000 barrels of oil in 2015. Block XXI, the third producing block, began production in 2009. For the last few years, more than 90% of the oil production has been from Blocks XIX and XXI of Tamsag basin in eastern Mongolia.
(Source: Petroleum Authority of Mongolia – Image: East Gobi desert)