Oil Production

The oil sector has a high potential for exploration activity and large-scale investment is required. A total of 22 contract fields, covered 538,000 square kilometres area of the total Mongolia's territory were selected. Now American, Australian and Chinese oil companies are running their activities on six contract fields under a Production Sharing Contract concluded with the Government of Mongolia. The foreign contracting parties have been drilling 27 oil exploration and evaluation holes since 1993 and spending about $l20 million on this purpose.

Mongolia began to export oil in 1997 testing the extraction of the exploration period. The US SOKO International and the Australian Rock Oil Companies are extracting oil in Tamsagbulag of Dornod aimag and Dornogobi aimag. Excavation officials say Tamsag may have 1.5 billion barrels of oil, and one area of Dornod aimag may contain as much as 50 million barrels of oil.

The SOKO International Company, which is developing the 19-22nd contract field of the Tamsag basin under the aforementioned agreement, made a $7.4 million investment, drilled four bore-holes and extracts 300 barrels of raw oil a day.

The joint group of the Australian Rock Oil and Chinese Dongsheng companies drilled two exploration holes in 2002 and the first hole was drilled to a depth of 2844 meters. I This was the deepest hole in the Dornogobi basin. The second hole was bored to 1,100 meters and slanting drilling, a first in Mongolia, is being used in the hole. In 2003, the company drilled one well, performed experimental service works on four wells, and by the end of the year had extracted 32,400 barrels of oil from five wells and exported 15,100 barrels of oil.

At the end of 2003, Parliament endorsed the amendments, which said that if contractors wish to extend the term of their prospecting activities, the government would allow the term to be extended by up to five years, taking into consideration adherence to contract terms and the necessity to continue prospecting activities at the contracted site.

Oil extraction of the country increased 3.3 times in 2003 over 2002. Oil exports also rose by a factor of 3.8. In 2003, 470,000 barrels of oil were extracted and 441,000 were exported.

In 2006, Petrochina Daquing Tamsag Mongolia, LLC which is conducting petroleum operations on Toson-Uul XIX, Tamsag XXI, Buir XXII blocks is planning to conduct 420 straight kilometers of 2D seismic, 1000 square kilometers of 3D seismic surveys and drill 35 exploration wells and 20 appraisal wells and invest 78 million USD.

In 2006 Dongsheng Jinggong Petroleum Mongolia which is conducting petroleum operations on portion of Tsagaan Els XIII and Zuunbayan XIV blocks is planning to drill 9 exploration wells at the Tsagaan Els Oilflield and 9 exploration wells and carry out fracturing of 23 wells and invest 23 million USD. The Mineral Recourses and Petroleum Authority of Mongolia is ready to conclude to Production Sharing Contracts with Mongolian company “PetroMatad”, Chinese company “China Golden Sea” and Canadian company “Shaman Resources” on Matad XX, Nyalga XVI and Tariach XV blocks, respectively. These companies willinvest in total of 24 million USD from 2007 to 2012 years.