Energy Independence and Internationalism: Oil Extraction and Refining in Mongolia So Far

By Marissa J. Smith

As Julian penned his request for a study on renewable energy potential to members of Mongolia’s cabinet and other relevant policy-makers two weeks ago, London stock exchange-listed  Petro Matad continued its campaign of exploration drilling in eastern and central Mongolia.

As part of concerns about energy, development, and independence guaranteed by proper international relations, oil exploration and refining have been long-term interests for the Mongolian state and Mongolians more broadly. They have so far, however, been realized only on a small scale and with partial control of Mongolians themselves.

In the 1950s and 1960s, oil was discovered, extracted, and refined in central Mongolia at Zuunbayan and Mongolians trained as petroleum engineers in the Soviet Union and Romania, only for the drilling to be suddenly stopped (Sanders 2017, 671), and these engineers apparently retrained (Purev and Purvee 2006, 15 and back cover). In the early 1990s, American petroleum geologists and engineers were quick to enter Mongolia. The New York Times reported that President George Bush was “intrigued” by President Ochirbat’s apparent invitation to drill at Zuunbayan in 1991, and suggested this may have influenced Mongolia’s being granted “most favored nation” trade status. Drilling by American-owned, British-listed company SOCO commenced at Tamsagbulag in the Matad soum, Dornod province in the 1990s (Sanders 2017, 671) but the site was sold to a PetroChina subsidiary in 2009, and tensions have since arose around the issue of the company’s Chinese ownership (Nielsen and Pedersen 2015, Pedersen and Bunkenborg 2012, Pedersen and Nielsen 2013). Recently there have been renewed concerns from Mongolians on the predominance of Chinese rather than Mongolian professionals among employees.

Reports of negotiations to construct a refinery with Japanese, and then Indian, “partners” near Darkhan have surfaced regularly in past years. Funding and expertise for a refinery are the most tangible result of Modi’s widely covered diplomacy vis-à-vis Mongolia and China circa 2015. In June, Mongolian news outlets reported that ground had been broken for a refinery at Altanshiree near Sainshand; just yesterday it was announced through state press agency Montsame that the refinery is thirty percent complete and Mongolian-Russian joint stock company Ulaanbaatar Railways is involved in construction (the photo, however, leaves room for skepticism about the progress of the project).

During fieldwork in Mongolia, I have found that the price of gasoline is a regular cause for comment on the ability and legitimacy of the current government, and taxi drivers bringing me to the center of Ulaanbaatar from the airport will often comment on the price of gasoline (and red meat) as soon as it has been established I am a Mongolian-speaker who has been away for some time. In the past two years, Battulga’s government, and particularly fellow wrestler-politician D. Sumiyabazar, Minister of Mining and Heavy Industry, has emphasized that oil and gas extraction would be pursued with renewed vigor (as I discussed in a previous post, at Davos, where he named Kazakhstan and Norway as nations to emulate), and the drilling by Petro Matad and (reported) construction of the Altanshiree refinery seems to be being framed at least as delivering on that promise.

Several features of Petro Matad bear further comment as they reveal a status quo regarding Mongolian state-corporate relationships and their international character. Mongolia currently imports around ninety-five percent of its petroleum products from Russia, via rail and truck; discussions about pipelines have repeatedly stalled (Sanders 2017, 673-674). Across Mongolian society, national “energy independence” (guaranteed by relations with third neighbors) is regarded as a worthy goal. How this independence is managed, however, is a point of potential controversy. During my fieldwork in 2010-2012, I was also told that the import of Russian petroleum products is conducted through Petrovis – the same company that is now a part owner of Petro Matad, and evidently transforming itself into another example of the familiar Mongolian multi-sector, partly internationally-owned company, with subsidiaries in construction as well as oil, natural gas, and coal extraction, processing, and energy distribution.

While associated with American and British third neighbors through part-ownership and listing on the London stock exchange, no doubt a huge point in its favor as far as establishing its legitimacy as manager of Mongolian energy, Petrovis is also of note because of the role of family members of the former General Director of Erdenet, Sh. Otgonbileg. His son, O. Sodbileg, currently member of parliament for Orkhon aimag (comprised of Erdenet city and a single neighboring soum, the fomer negdel collective established to supply food for Erdenet) was formerly deputy director of Petrovis (Sanders 2010, 803), and the family connections with Petrovis were emphasized to me by Erdenet Mining Corporation employees during the 2012 parliamentary elections. For voters then, at stake was Sodbileg’s connection with the Erdenet – if this connection to the community were strong enough, Sodbileg’s connections with Petrovis would be a plus, but if not, these could be a drain on the community.

To summarize, the distribution of petroleum products in Mongolia has already revealed concentrations of power through exclusive control over resources, but may prove an interesting area in which to observe how this is held to be legitimate management informed by expertise from the “developed” third neighbors versus stealing from the Mongolian nation by extracting and exporting without obtaining a “fair world market price” through collusion with Mongolia’s neighbors by Mongolians less fully bound to the state based in Ulaanbaatar, as has long been key to controversy about Erdenet.

References

Nielsen, Morten and Morten Axel Pedersen. 2015. “Infrastructural Imaginaries : Collapsed Futures in Mozambique and Mongolia.” Reflections on imagination: human capacity and ethnographic method. Ed. Mark Harris and Nigel Rapport. London: Ashgate. p. 237-262.

Pedersen, Morten Axel and Mikkel Bunkenborg. 2012. “Roads that Separate: Sino-Mongolian Relations in the Inner Asian Desert.” Mobilities 7. https://doi.org/10.1080/17450101.2012.718938

Pedersen, Morten Axel and Morten Nielsen. 2013. “Trans-temporal Hinges: Reflections on an Ethnographic Study of Chinese Infrastructural Projects in Mozambique and Mongolia.” Social Analysis 57, 1: 122-142. https://doi.org/10.3167/sa.2013.570109

Purev, O. and G. Purvee. 2006. Mongolian Shamanism. Ulaanbaatar: Munkhiin Useg.*

Sanders, Alan J. K. 2017. Historical Dictionary of Mongolia. Fourth Ed. Lanham, MD: Rowman and Littlefield.

  1. Historical Dictionary of Mongolia. Third Ed. Lanham: Scarecrow Press.

* Gurbaadryn Purvee, a Darkhad Mongol and brother of shamanism specialist O. Purev, writes in the preface to this volume of his attempts to publish earlier versions of the manuscript in Romania when he was a student studying petroleum engineering in the late 1960s. Purvee later trained in Ulaanbaatar and Moscow as a labor economist.

This entry was posted in China, Energy, Foreign Investment, Foreign Policy, India, Oil, Russia, Trade and tagged . Bookmark the permalink.

Leave a Reply

Your email address will not be published.