ZUUNBAYAN, Mongolia -- An adventurous Texas oil company is pumping oil from an area in Mongolia's Gobi desert which was given up for dead by the Russians 25 years ago -- and plans to sell it to China and Russia.From a helicopter, the former Russian oil base looks like any isolated desert town with felt tents and a few scattered buildings, including the skeleton of a burnt refinery and a lake of oil that has leaked from rusty tanks.
A closer inspection shows new oil tanks next to the leaking Russian ones, with freshly painted containers, oil pipes and pumps in rows outside Russian-style buildings that have become the field office of Bayan Oil, a joint venture between the Nescor Energy Company of Texas and state-owned Mongol Oil.
"We are targeting China, Russia and Mongolia as markets," said Nescor president Nasr Boukadoum, an American national born in Algeria. "We are discussing with the Chinese and intend to sell to Hohhot refinery in [China's] Inner Mongolia soon.
"We are ready for commercial production from our one field," he said. The company is doing exploratory work in a second field near the first one.
Nescor, founded by a Texas family in the 1950s, is building a small refinery in the United States to be shipped to Zuunbayan in May 1996, he said.
Nescor's plans call for a 6,000 barrel-per-day refinery to be operational in the first half of 1996. It will be expandable to 10,000 barrels per day as output from nearby oilfields grows.
Virtually all of the refinery's initial production will be consumed in Mongolia, which currently must import all of its supplies of refined products such as diesel fuel and petrol.
The joint venture is pumping oil from one of 21 production areas in the eastern Gobi in southeast Mongolia.
The crude oil is expected to be transported to Hohhot by railway, with trucks by road an additional option.
Boukadoum became interested in Mongolia's oil three years ago through the World Bank and chose an area with a railway connection in Zuunbayan.
The Russians left after their refinery burnt down in 1969, when Siberian production was booming and Zuunbayan seemed unprofitable with the technology available at that time.
But Nescor uses new technology that makes it profitable, explained Nescor's operations manager Ken Kidneigh.
The crude oil is at a shallow depth of about 650 meters but is solid at temperatures of 21 Celsius or lower and cannot be pumped.
Nescor treats the oil with chemicals, allowing it to flow through pipelines at temperatures as low as 0 Celsius, he said.
"We are having to re-enter the wells, clean them out if we can and return them to production," he said. "This [technology] was not available to the people who operated this field in 1968-69 when they abandoned it."
The wells will not pump continuously until gathering systems and storage facilities are completed in early 1996.
Nescor expects to begin drilling new wells early this month. So far, the company has invested about $12 million in the field, plans to invest more in 1996 and is bullish about the future.
"Mongolia is a very calm, safe and secure area to do business, where Nescor will gain reasonable profits for its investors," Boukadoum said.
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