Mongolia has been divided into 22 oil fields (in total 528 thousand square kilometers) and between the period of 1991-1992 an international bidding was announced twice in order to attract investors into this areas. Since then, the Petroleum Authority of Mongolia has made a “Production sharing agreement” with investors from Canada, the USA, Australia and China concerning operations in 12 oil fields. As a result, 6 fields are currently being explored and exploited: Tamsag basin (XIX,XXI,XXII contracted areas), Zuun Bayan, Tsagaan Els basins (XIII,XIV contracted areas) and Western Mongolia (II contracted area).
In early 2001, the Exploration Institute of the Chinese National Oil Corporation conducted a survey of the Tamsag basin and estimated its reserves to be 1.5 billion barrels.
Petroleum Law of the Mongolian People’s Republic (MPR)
Article 3. Ownership of Petroleum
All Petroleum occurring under the surface of the earth in MPR shall belong to the State.
Article 4. State management of petroleum operations
1. Petroleum operations in MPR territory shall be carried out only in accordance with permits issued by the MPR Government and the petroleum administration.
2. The MPR Government may decide to prohibit or restrict production of petroleum in any part of its territory for reasons of national security or to prevent damage to natural oil reserves, the population, or to protect relics of historical and cultural importance.
3. The petroleum administration shall have the sole right to draw up a work programme for petroleum exploration and supervise its implementation.
4. The MPR Government shall adopt the regulation for implementation of this Law.
Article 5. Status of Foreign Contractors
Unless the international treaties to which MPR is a Party provide otherwise, foreign Contractors shall be protected by and obliged to obey the laws of MPR and to fulfill their obligations under their contracts in the same manner as any legal person or citizen of the MPR.
Article 6. Basic requirements of petroleum contracts
Petroleum contracts shall meet the following basic requirements:
1. machinery and technology capable to extracting not less than 20 percent of a field’s resources occurring under the surface of the earth shall be used;
2. there shall be consistency with the establishment and development of the petroleum processing industry in MPR;
3. programmes for the training of qualified personnel and for the employment of foreign citizens shall be developed;
4. machinery and technology of high economic efficiency shall be used in petroleum operations and the ecological balance of the affected environment shall not be disturbed;
5. all original information, data and reports related to petroleum operations shall be submitted to the petroleum administration;
6. any measures necessary to provide for the safety of the population, the protection of the life and health of staff, the prevention of accidents, the avoidance of damage to property, natural resources, soil, subsoil, and ecology, and for the restoration of areas used shall be taken.
Article 7. Grant of tenure to Contractors
1. In order to enable the conduct of petroleum operations, local authorities shall grant land tenure permits and the Government shall grant mine tenure permits.
2. Exploration for and production of petroleum beyond the boundaries of permitted tenures shall be prohibited.