Mongolia is to seek approval from the Import-Export Bank of India to build an oil refinery and pipelines with US$1 billion in infrastructure funding negotiated last year, a project that could boost the nation’s GDP by 10 percent.
The government intends to use US$700 million of the loan for an oil refinery and US$264 million for oil pipelines, according to a statement on its Web site last week.
Mongolian Prime Minister Erdenebat Jargaltulga has instructed ministries to negotiate with the Ex-Im Bank of India, according to the statement.
Indian Prime Minister Narendra Modi signed agreements last year to provide the US$1 billion credit line to fund railroad and infrastructure projects in Mongolia.
Indian Ambassador in Ulan Bator T. Suresh Babu did not immediately respond to an e-mail seeking comment.
Mongolia is looking to India and other investment partners as its economy contracts and its debt burden grows.
Last month, China backed off from talks with Ulan Bator over a loan package to help the economy after a dispute over the visit to Mongolia by the Dalai Lama.
The refinery, to be sited in Sainshand County, is to have a capacity to process 1.5 million metric tons of oil per year.
It is to produce 560,000 tonnes of gasoline, 670,000 tonnes of diesel fuel and 107,000 tonnes of liquefied gas annually.
Sainshand, located on the Trans-Mongolia railway, is planned to be a transportation hub.
Mongolia’s oil fields are primarily located in Dornod Province in the country’s east, about 545km northeast of Sainshand.
PetroChina Daqing Tamsag LLC operates the oil fields and has produced 7.5 million barrels through the first 11 months of this year, according to the Mongolian National Statistical Office.
All of Mongolia’s crude is exported to China.
The 20-year loan is to have an interest rate of 1.75 percent and principle payments are to be waived during the first five years, according to the April statement.
Mongolia imported 346,500 tons of gasoline worth US$172 million and 479,800 tons of diesel worth US$219 million in the first 11 months of this year, according to the office.
More than 97 percent of the gasoline and diesel was imported from Russia.