Mongolia will seek the approval of India's Export- Import (Exim) Bank to use a $1bn loan negotiated last year to finance a project for the construction of an oil refinery and oil pipelines, Bloomberg reported on December 19.

In 2015, Indian Prime Minister Narendra Modi signed agreements to provide a $1bn credit line to Ulaanbaatar for the construction of a railroad and other infrastructure projects. Under pressure from an economic contraction, Mongolia is instead seeking to prioritise oil refinery projects. Ulaanbaatar wants to use $700mn from the loan to fund the oil refinery that will be situated in the Sainshand country and will have a capacity to process 1.5mn metric tons of oil per year.

The refinery could boost the country's GDP by 10% per year, according to a statement on the government website. Ulanbaatar intends to use an additional $264mn for the construction of oil pipelines to China.

Mongolia produced some 7.5mn barrels of crude in the first eleven months of the year, all of which was exported to China. The country imports refined products like diesel and gasoline. 

As Mongolia's economy is shrinking and its debt is growing, the country is looking for investment partners abroad to finance infrastructure projects. In November, China pulled back from talks with Ulaanbaatar over a loan package after its North Asian neighbor allowed a four-day visit by Tibet’s spiritual leader, the Dalai Lama.