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Frozen in the Dark

December 23, 2021

Mongolia is often depicted as having two seasons—three months cold and nine months very cold.  Our condo in Ulaanbaatar was always warm though that may have changed, as we have not been back in a while to have a visit.  I do know that I have experienced minus 50-degree weather there which will freeze champagne as shown below when I christened the first truckload of oil production in eastern Mongolia to export to China.  

Some years prior to that time, I took a helicopter trip to the Gobi Desert to have a look at a former Russian abandoned small oil field and a small refinery that had burned.  As there were very few English-speaking Mongolians, I was most fortunate to find my translator, Jargalsaikhan, who is the young man shown below wearing the camo vest.  In the past twenty years, Jargal has become a famous Mongolian news commentator and publishes The Defacto Gazette under his nom de plume, Jargal Defacto.  

Jargal recently published a provocative article to the effect that Mongolia is on the brink of living in complete darkness and freezing cold. He modeled the article on the recent happenings in Beirut, Lebanon where the city suffered from a power blackout shutdown when the city traffic lights, elevators and refrigerators did not function for an extended period. Refrigerators are not an issue in Mongolia though the capital of Ulaan Baatar is comprised of high-rise apartments surrounded by makeshift “gers” or portable round tents occupied by migrants from the countryside. Although “ger people” do not have coal powered steam heat, they burn a toxic mix of most anything to keep warm which blankets the capital with massive air pollution.  You will note how professional Jargal appears below when he is not with a bunch of oil guys flying around in an ancient Russian helicopter.  

Jargal clearly states that Mongolia’s energy supply is unreliable and inadequate as domestic power generation capability is not growing while consumption increases every year, and electricity is purchased from abroad at high prices. The largest export supplier of electricity is the big neighbor, Russia, which for many years considered Mongolia a vassal state. Given Russia’s actions in another part of the world with a “do-over” attempted reclaim of Ukraine, one should be careful of the giant neighbor. Sadly, the source of power is coal-fired, and Mongolia desperately needs additional and cleaner power generation thermal plants. Electrical prices are kept low for political reasons, but it takes investment capability to scrub toxic coal pollution which continues to worsen considering the aging facilities.  Sadly, cleaner and affordable fuels of sufficient scale are not readily available there in today’s world. In the countryside, the ger families in the steppe have solar panels to charge batteries for TV reception while they burn cow paddies with brush for heating.  

We made a meaningful oil discovery in eastern Mongolia in 1997 and began development of a significant oil field which is the first and only one in that country to date.  Bill Penttila, shown in the previous helicopter image above standing next to Jargal and to the right of me, was responsible for the oil discovery following years of his personal effort. Incidentally, Bill was the geologist for the discovery well at Prudhoe Bay, Alaska which has produced over 13 billion barrels of oil. Nonetheless, he was more excited about our discovery in Mongolia and celebrated by marrying Enkhma, a wonderful Mongolian lady.  

Although we were the pioneers in Mongolia, we ultimately sold the oil field to the Chinese who have exported over 60 million barrels of oil to China.  Over the years, I resisted pressure from the Government of Mongolia to build a refinery. My message would be the same today, since the Government of Mongolia has a contractual interest in a portion of the hydrocarbons produced, trade that for refined products as there is a surplus of polluting refineries in the world.  

However, Prime Minister Modi of India visited Mongolia in 2015 and promised them financial aid and expertise to build a refinery there. You should know there is a residual tie from the origin of Buddhism in India to a country that has reclaimed its Buddhist heritage after nearly having it eradicated by the Russians. In fact, the image below shows an airport reception for the Indian ambassador and “bhikkhu,” or Buddhist monk to Mongolia, in 1993 being honored upon his return from India with a relic of Lord Buddha.  Joey sat next to him on the Air China flight from Beijing and showed him her image of her Lhasa Apso dog, Cleo. They became great mates though it was not until we landed that anyone realized he was the celebrity of the occasion.  

Accordingly, the Mongolians rolled out the red carpet for Modi in 2015 and he promised a refinery for Mongolia which has not been constructed with the greatest dispatch.  Nonetheless, Modi made a splendid impression and proved to be a charmer though he has been a bit slow on the delivery of his promises.  Like many of us, he was gifted a famous racehorse shown below but it remained behind after he departed.  In fact, all dignitaries go to this location which is a short drive from Ulaan Baatar to witness the three manly sports of Mongolia: horse racing, archery and wrestling.  

A couple of weeks ago, a Mongolian parliamentary delegation to India led by Gombojav Zandanshatar, Chairman of the State Great Hural (parliament), met with the President of India, Kovind. President Kovind promised to complete the $1.3+ billion project next year. However, if the refinery project is completed next year, there remains a vast number of other efforts that must be completed before this ill-conceived and unnecessary project produces a drop of fuel. 

This situation underscores the real threat of Asian developing economies to undermine the carbon emission reduction gains of the developed economies. Mongolia, China, and Vietnam clearly rely on the leading energy polluter—coal. Mongolia’s portion of those carbon emissions is microscopic in comparison to China but every bit counts. On the other hand, a failure to provide adequate heating in Mongolia carries a potential loss of life and great hardships that few other countries with much greater and affordable power sources face.

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