Old Article but has significance for MGR, IPJ and JVAG
In October of 1996 Far Eastern Economic Review published an article
titled "Black Gold". According to the magazine, industry analysts now
believe that Mongolian oil reserves are "much larger" than initial
estimates of 6 billion barrels of recoverable oil. "Giant" by industry
standards Tamsag field in which several Western corporations including
New-York based Soco have exploration rights is estimated to have between
500 million and 1 billion barrels of recoverable oil. And this oil is of
"top quality". It is much better than any oil yet found in China for
example. Soco is expected to start exporting "large quantities" of oil
this year.
What implications this could have on Mongolian economy? Let's start with
basics. The world price of oil is 20 dollars per barrel. Total oil from
Tamsag field alone is worth between 10 billion and 20 billion of US
dollars. Mongolia has only 2 million people and its GDP is 1 billion
dollars. Yes! Oil from Tamsag field is alone is more than TWENTY times
larger than entire GDP of Mongolia!
SOCO raised more than 200 millions dollars on London stock markets for
Mongolian project. I am not Ed Story and I don't have access to Soco's
business plans. However, it would be logical to assume that they plan to
make money and to do so within next five years. 200 million dollars
invested into Mongolia within next 5 years would mean 3.7 per cent
annual growth in GDP even if the rest of economy stays flat! Remember,
Mongolian GDP is only 1 billion dollars. Now, we did not even take into
account oil production! Let's assume that Tamsag yields 15 million
barrels of oil in the next 5 years(One of Soco's wells has exactly that
amount of oil). It would mean 300 million dollars of revenue and 5.3 per
cent annual increase in Mongolian GDP. Altogether it is quite possible
to conclude that Mongolia is virtually guaranteed 8.4 per cent annual
economic growth for the next five years. And we did not even take into
account the rest of economy! And what about other discoveries in Tamsag,
what about Tsagaan Els, what about Zuun bayan, what about Nescor Energy,
Tsagaan Shonkhor and this newcomer Mantaur? Surely they too would start
production in the next five years(It is already proven that these fields
have oil). And what about the next 20 years?
Now we will talk about the rest of the economy. No one yet fully
realises the vast difference between Mongolia's economic potential and
present. How about these figures:
1 % of Mongolian GDP is only TEN MILLION DOLLARS! If I had won in a
lottery in Australia and spent all of it in Mongolia, I alone would
contribute to half of our current economic growth in Mongolia! (2.6% in
1996, ie 26 million dollars)
1 ton of gold increases GDP of Mongolia by 1 %. Mongolia has over 3000
tons of gold. New major Bumbat goldfield is expected to significantly
increase current annual production of 5 tons. This foreign venture alone
will increase GDP of Mongolia by several percentage points in the next
few years. Situation in goldmining is currently described as "gold
rush". Indeed, Mongolia mines more gold than California did during gold
rush of 1849.
500 thousand barrels of oil increases Mongolian GDP by 1 percentage
point. Soco and other foreign companies talk of oil production in terms
of tens of thousands barrels a DAY! I know it is difficult to imagine
GDP growth rates of 1 % a week, it is unrealistic even, but it shows how
small Mongolian economy really is, compared to its mining potential.
10 thousand more foreign tourists are very much likely to produce 1%
economic growth in Mongolia. Mongolia is only 3 hours away by air from
Seoul and 4 -5 hours from Osaka. These countries have more money they
can possibly spend and Japanese spend large amounts of their incopme on
tourism. Mongolian tourism industry is becoming much more sophisticated
as recent Solar eclipse has shown. There is absolutely no reason why
Mongolia can't have MILLIONS of tourists coming each year as they do in
Singapore and Hong Kong for example.
A new skyscraper is being built in Ulaanbaatar, Bodi Tower. The cost of
project is estimated to be 50 million dollars and it is expected to be
completed in 4 years. I hope you could calculate for yourself how this
building alone could increase economic growth in Mongolia.
A typical 3 star hotel would cost about 20 million dollars. How many
such hotels would be built in Mongolia if it were to have 1 million
tourists by 2000?
I don't have any statistics, but uranium mine at Mardai is of great
interest to some foreign investors. The information about this site used
to be state secret, but now there are estimates that this mine could
prove to be bigger than some Australian ones. Austrlia is a world leader
in uranium production, by the way.
There is a proposal by international investors to build a gas pipeline
from Russia to China through Mongolian territory. Pipeline is worth 6
billion dollars. I wonder how much money would be spent on 1000
mile-long Mongolian section?
Enough! Mongolia is GUARANTEED to have double digits economic growth
rates in the next five years and in the foreseeble future. It would take
a while for it to become "the richest nation on Earth", but Mongolia
certaily will be the fastest growing economy in the world very soon.
If all this will not happen then we Mongols would be the stupidest
people on Earth and we would deserve life of poverty and suffering! |
