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Wednesday, July 6, 2011

Mongolia Briefing is a magazine and daily news service about doing business in Mongolia. We cover topics relating to the Mongolian economy, the market in Mongolia, foreign direct investment and Mongolian law and tax. It is written in-house by the foreign investment professionals at Dezan Shira & Associates

Fuel Prices in Mongolia Expected to Stabilize

By Elena Fehrbach

May. 2 – The Government of Mongolia is expecting the fuel prices in Mongolia to stabilize due to diversification in the quantity of fuel suppliers. The current situation in Mongolia is almost 100 percent fuel dependence from Rosneft, one of the key fuel producers in Russia. Such direct dependence causes unexpected fluctuations in fuel price due to company’s corporate and regional conditions. The Deputy Minister of Mongolia is discussing the amendment to the fuel purchase agreement allowing Mongolia to buy fuel from Rosneft based on international market prices.

To diversify and strengthen fuel suppliers’ options, Mongolian government has started negotiations with fuel suppliers from China, South Korea and Belarus. The fuel purchase agreements are expected to be signed between China Oil and Mongolian fuel importers, such as NIK, Shunkhlai and Magnai Trade in the nearest future. Negotiations also involve South Korean fuel suppliers, such as Hyundai and SK Energy.

The price of crude oil exported from Mongolia to China will directly influence the fuel purchase price by Mongolia. The main crude oil producer in Mongolia is Dachin-33 company, it is named after the oil deposit in operation. According to the Ministry of Mining, there is no any serious indication that the oil price may rise soon, allowing to import fuel from China at stable price in the short to medium term. Due to this, the retail price for fuel in Mongolia may even decrease from next month.

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