“Mongolian companies should collaborate, not compete, with one another”

J.Oyungerel, Vice Chairman of the Governing Board of  Petrovis LLC and Board Member of Energy Resources LLC, talks about what to do to increase export capacity and why the state should trust the private sector more.

What has been the actual progress in arranging for easier and quicker export of commodities produced in Mongolia, after all the regular meetings between Ministers and representatives of the business sector?

People have begun to refer to Mongolia as the Saudi Arabia of coal because of the enormous amount of coal we have. But what do we do to sell all this coal, as also our copper and other commodities? Tavan Tolgoi is believed to have around 6 billion tonnes of coal, of which, at the moment, only around 4 million tonnes are being mined annually. All of this is exported. That also is our present export capacity. This is really a very low figure.

Politicians decide that cash will be distributed to the population and claim this will improve the national standard of living. They assert that exports will go up and the economy will flourish. Talking is easy but unless infrastructure is developed  there is no way to export more and all our natural resources will remain unutilised. So where will the money come from? Energy Resources considers increasing the export capacity the top priority. This does not mean that we are against building an industrial complex in Sainshand. Both projects are necesary as both would contribute to raising the export potential of Mongolia. But the Sainshand complex project is still in a draft stage while things have moved in the case of the construction of the railway. Since we received permission from the Government to go ahead Energy Resources has completed all necessary studies related to the project and now we are ready to begin construction of the railway. We realise we have a very short warm season to work on both the railways  and the roads and have prepared ourselves accordingly.

Will Mongolia be able to compete in the international market when it hopes to begin exporting coal  in a way?

For this we have to know where Mongolia stands in the world market. Coal is produced in many countries and the total global production is 855 million tonnes a year. What percentage of this huge production and export can Mongolia account for? China alone produces half of the world’s coking coal but with so many steel plants, it still has to import coal. Its import figures have jumped almost threefold from 2008 to 2009 and is likely to keep increasing. China buys most of its coal from Australia, followed by the USA and Indonesia. At present, Mongolia’s total export of coal is a fraction of these countries’, so we have to work hard to become one of the gest, if not the gest, exporters of coal in the world.

The capacity of the railways will be a major factor in this. How exactly should Mongolia increase this capacity?

The Ukhaa Khudag-Gashuunsukhait railway that Energy Resources is to build will be able to transport 15-18 million tonnes per annum, so Mongolia can export at least 15 million tonnes of concentrated coal per year. This figure is way too low when we remember that Tavan Tolgoi has 6 billion tonnes of coal. When the Sainshand project is implemented and Mongolia starts exporting coking coal, it will go through Zamiin Uud, which is 400 km away. The length of the railway from Ukhaa Khudag is, however, 270 km. Secondly, the new railway to and from Sainshand is planned to be built with a broader gauge so all freight will have to be transferred. We are all aware of the congestion at Zamiin Uud even now and if 10 million tonnes of coal is to be added, 400 wagon wheels will need to be changed everyday. You can imagine how much this will add to the cost of the coal. Export is always dependent on the efficiency and speed of transport and we are likely to lose on this. I would like to correct a popular perception. The Chinese railway is not narrow. It runs on a 1.435-mm gauge which is the international standard.

At present, with no railway, the coal is transported by trucks. Tavantolgoi LLC, a local small company, has been using them for the last six years. On an average it is twice more expensive to transport by trucks than by railway. The movement of trucks raises a permanent cloud of dust in the Gobi region and this has forced residents and livestock to abandon the area. No matter how fast the trucks go and come back they cannot carry more than 5-6 million tonnes per year. Railway transport is thus a must. If Mongolia strives to be competitive in coal export, we must keep to a minimum the cost of producing, concentrating, transporting and delivering to the market. I should also mention that transport by truck not merely causes environmental damage, it can and does take human lives too, as there are many accidents, especially when the visibility on the road is bad. Since Energy Resources began the development in Ukhaa Khudag, it has worked with other companies to improve the current condition of roads, but nothing much can be done about the dust clouds. Only railway transport can export large volumes of coal. Even the railway alone will not be enough when Mongolia develops other natural resources in the future and both transport and export increase.

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