India-funded Mongol refinery to begin operations by 2028: MEA

India’s largest overseas development project — the $1.7 billion Mongol Oil Refinery, funded through a line of credit from New Delhi — is expected to be completed and operational by 2028, the Ministry of External Affairs (MEA) announced on Tuesday.

Speaking at a media briefing following the visit of Mongolian President Ukhnaagiin Khurelsukh to India, Secretary (East) P Kumaran said the landmark refinery project, being built with Indian assistance, is on track despite earlier delays due to Covid-19 and Mongolia’s harsh weather conditions.

“The refinery is coming up very well. Almost all the civil work is over. Refinery equipment is being manufactured in India and will soon be shipped to Mongolia,” said Kumaran.

“We expect that by 2028, the refinery should be in operation. The Mongolian government attaches great importance to this project as it will help them achieve energy independence by refining their own crude oil rather than exporting it,” he added.

The refinery — located near the Mongolian city of Altanshiree — is India’s largest Line of Credit-supported venture abroad. It was initially valued at $1.2 billion but later expanded to $1.7 billion to cover additional costs and capacity enhancements. Once operational, it will produce petrol, diesel, LPG and aviation fuel, substantially reducing Mongolia’s dependence on Russian imports.

Kumaran confirmed that a memorandum of understanding on geology and exploration was signed during the Mongolian President’s visit. The agreement paves the way for deeper cooperation in oil and mineral exploration to support future operations of the refinery.

“Currently, most of Mongolia’s crude is exported to China and refined products are imported from Russia. To ensure the refinery’s long-term sustainability, the Mongolian side wants to explore more domestic oil reserves. India has expressed interest in participating in these exploration and prospecting activities,” Kumaran said.

On the logistics of importing and exporting raw materials, Kumaran said India is examining both Chinese (Tianjin port) and Russian (Vladivostok) routes to access Mongolian resources, depending on economic viability.

“Mongolia is landlocked and depends on its neighbours for access to ports. We are open to using either or both options — Tianjin or Vladivostok — whichever is more cost-effective,” he said.

Russia currently offers discounted transport charges to Mongolia for using Vladivostok and the Trans-Siberian Railway, which India may leverage to reduce costs on future energy and mineral shipments.

Highlighting Mongolia’s rich natural resources, Kumaran said India is exploring cooperation in coking coal, copper, gold, iron, zinc and uranium. Mongolia recently signed a one-million-tonne-per-year uranium mining agreement with France, and India has expressed interest in joining future collaborations.

“Mongolia offers itself as a potential partner for supplying coking coal to India’s steel industry. The only challenge is transportation, which we are working to resolve,” Kumaran noted.

On renewable energy, Kumaran said President Khurelsukh informed Prime Minister Narendra Modi that Mongolia — the “land of eternal blue skies” — enjoys over 230 sunny days a year, making it ideal for large-scale solar energy generation.

“Mongolia has now signed the framework agreement to join the International Solar Alliance (ISA). With its vast open spaces and low pollution, it can become a major solar energy partner for India,” he said.

The Mongol Oil Refinery project stands as a cornerstone of India’s Act East and Connect Central Asia policies, symbolising the growing strategic and economic partnership between New Delhi and Ulaanbaatar.

For Mongolia, the refinery represents a vital step towards energy self-reliance; while for India, it reinforces its role as a trusted development partner in the Indo-Pacific and Eurasian regions.