* Investor concerns after latest setbacks to Rio Tinto
* Proven reserves of 2.4 billion barrels yet to be exploited
* Foreign investment down 32 percent from start of the year
By Jack Stubbs
LONDON, Aug 16 Mongolia's oil reserves are on a
scale with Britain's and Argentina's, but finding investors
brave enough to exploit them is proving tough, and cracks
appearing in the country's mining industry could make it
The sparsely populated and landlocked country bordered by
Russia and China has proven reserves of 2.4 billion barrels, but
shortcomings in infrastructure mean the vast wealth has yet to
Australian-owned Wolf Petroleum is hoping to
showcase Mongolia's potential to foreign investors, but it is up
against concerns over the ongoing Oyu Tolgoi copper mine saga,
where Rio Tinto's expansion plans have stalled in
Mongolia has raised concerns about the costs of the Oyu
Tolgoi expansion and the potential that rising expenditure will
delay when it starts receiving its share of profits.
But Wolf's management is upbeat.
"Mongolia is one of the last onshore frontiers where
multibillion barrels of oil can still be discovered and
produced," said chief executive Bataa Tumur-Ochir.
"Lately the government of Mongolia and the people are
starting to really feel and understand the importance of foreign
But investors are not so sure.
"As it stands, Mongolia simply does not have the
infrastructure to support any kind of significant oil
discovery," said Svetoslav Varadzhakov, Vice President at
London-based Collabrium Capital.
"Big oil companies looking to buy up any discoveries are
going to look at what's happened (to Rio Tinto's project) and
draw their own conclusions."
Foreign investment in the Mongolian mining, exploration and
petroleum industry fell by 32 percent in the first six months of
2013, said the Ministry of Economic Development on Thursday,
leaving oil companies frustrated by the silhouette of major
producing oil fields just over the Chinese border.
A country where cattle outnumber people fifteen to one,
Mongolia has only 3,000 kilometres of paved road and just one
oil refinery, owned and operated by PetroChina.
Hoping to build on the success of PetroChina and fellow
Chinese group Sinopec, which are exporting about 4.5 million
barrels a year to China by road, Wolf Petroleum is Mongolia's
largest exploration company with 74,400 square kilometres of
exploration licences. China, now the world's second biggest oil
consumer, represents a ready market.
Analysts believe the experiences of global miner Rio Tinto
, which said on Wednesday it would axe up to 1,700 jobs
on its Mongolian operation, will have a knock-on effect.
"But big risks can also mean big rewards," said Varadzhakov.
"I think now could be the right time to go to Mongolia. Go now,
while everyone else is scared."