Almost two decades has passed since Mongolia’s first President, P.Ochirbat, dampened the upper lapel of his deel with the crude oil springing from the Tamsag Basin, toasting to the future of Mongolia that would process at least a small amount of the “liquid gold” coming from Mongolian land to provide the countries petroleum needs themselves.

Mongolians are now seeing that the first President`s hope has failed. Mongolia is still 100 percent dependent on fuel imports. It is interesting that there has been a practice of laying the foundations of oil refinery plants before elections in Mongolia. As Ministers report during the plenary session meeting of Parliament last Friday, six companies have been granted the rights to oil resources. But this may all be just a show.  

Last Friday MPs agreed to discuss the Petroleum Law of Mongolia. If the law is passed, the last law of the People's Republic of Mongolia will be renewed. The current petroleum law was adopted a year before the Constitution law was ratified in 1992. A new draft petroleum law is due to be discussed as there is a lot of mess regarding the implementation of the Petroleum law of the Mongolian People`s Republic since the “Regulation for implementing the petroleum law of the Mongolian People’s Republic” was passed by the Government resolution. The current Petroleum law is said to have articles that are unable to regulate relations for oil processing entities, it hard to understand and full of discrepancies. The new draft law is one that had been turned down a several times.

It is true that there is a need to renew the law due to the massive socio-economic changes that occurred in Mongolia from 1991 to 2014. However some MPs are afraid the new law may be worse than the old one.  

The mining sector has been a priority in Mongolia`s economy in recent years. It is estimated unofficially that Mongolia has resource of 200 billion tons of crude oil. This is enough to process and provide for the national petroleum demand and even build sub-plants.

During the era of socialism between 1950 to 1969 Mongolia provided over 20 percent of national oil product demand with 956,7 thousand tons of crude oil processing from Zuunbayan in Dornogovi aimag. Since Mongolia`s transition to a market economy, the issue was raised about providing Mongolia’s own national oil products, but no substantial changes have been made so far. Some people explain it away with the influence of national oil importers.

Now Mongolia imports large amounts of oil products from other countries: 80 percent from Russia, and the rest from Kazakhstan and China. Mongolia was under the process of forming an agreement with Japan to build an oil refinery plant in Darkhan. But the agreement was forced to come to a halt as the plant was only to process imported crude oil, according to the Mining Minister.

However, Mongolia has focused on attracting investment in oil extraction since 1990. In the scope of this policy, Mongolia marked out 22 oil fields (including 13 oil basins) and launched an international bidding competition to draw in international investors. Currently, China's state-owned PetroChina is working in the oil fields in Dornod Province.

There is a high expectation that proper issues regarding oil exploration, extraction and processing will be raised during the new draft law discussion. Somehow the law that has been turned down several times has now been approved in the first stages.