History of exploration and extraction of oil started in Mongolia when a deposit of shale has been discovered which is related to the origin of oil as a result of a geological research in Mongolian Gobi region in 1920s.
From 1940s, large works were carried out by a group of Russian researchers and a special Mongolian entity in order to discover oil deposits. In 1949, the very first oil extraction was performed. Since taking the first sample, a big number of exploitation boreholes have been drilled and a large amount of oil has been extracted until mid of 1960. Professional organizations for oil exploration from the former Soviet Union closed in 1963, therefore the oil exploration and research works completely stopped for about 30 years. In 1990s, the oil exploration revived and extraction works started. Although the country has begun to export the oil, Mongolia still does not have an oil refinery.
In recent years the issue of establishing an oil refinery with the capacity of processing not less than one million tons of oil a year has been widely discussed. It has been projected that Mongolia is fully able to build such capacity of oil refining based on its oil reserve estimated 35-42 million tons. Mongolia already has become an oil exporter country. The country exported 351,500 tons of oil to foreign countries in 2011, and extracted 3.38 million barrels of oil by the year 2012. It has been calculated that Mongolia would extract 1.5 million tons of oil in 2015.
At the same time, income from oil to the State Budget has been increasing year by year. In 2012, the state collected 104 billion tugriks from the oil extraction revenue. It has been projected that this size would reach 146 billion tugriks by 2013 and MNT 300 billion by 2016.