Mongolia Joins Shale Revolution, But at What Cost?
Image Credit: REUTERS/Ben Blanchard

Mongolia Joins Shale Revolution, But at What Cost?


This spring, Genie Energy signed an agreement with the government of Mongolia, under which its subsidiary will explore oil shale over a five year period. Statements to the press have spun the agreement as a way for the country to achieve energy independence from Russia, as Mongolia currently imports 90 percent of its petroleum needs from its neighbor. Estimates have put Mongolia’s oil shale reserves at 800 billion tons or more.

However, critics of oil shale contend that the costs of extracting the oil from the shale will not produce a satisfactory energy return on investment (EROI). While shale oil and shale gas currently dominate global energy news as the “shale oil revolution,” oil shale is its poorer relative. It’s more costly to extract, and in that respect has been likened to tar sands in Canada. Richard Heinberg, Senior Fellow at the Post Carbon Institute, a think tank that specializes in energy initiatives, explained to The Diplomat: "Oil shale is even worse than the tight oil [shale oil] extracted with fracking. The resource has a very low energy density, so much energy and effort have to be expended in extraction and upgrading each unit of output. The tar sands of Canada offer an analogy, but oil shale is an even lower-grade resource.” 

After learning about the announcement of the agreement, Canadian writer and anti-tar sands activist Macdonald Stainsby traveled to Mongolia in May of this year to share his knowledge with local environmental activists. He told The Diplomat: “When I arrived only the foreign language press had even mentioned oil shale; OT Watch and other environmentalists in the country were completely unaware of either the dangers of oil shale development or that this license existed.”

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Sukhgerel Dugersuren, the executive director of OT Watch, a mining oversight NGO, met with Stainsby to address the lack of information on the project. “Because no one knows about shale oil or oil shale, I attempted to set up a briefing for the environmental civil society. Only one person I contacted personally came.”

Mongolia is part of the Extractive Industries Transparency Initiative (EITI), which is designed to increase transparency so civil society can be made aware of licenses, taxes and royalties paid to governments. However a spokesperson for EITI Mongolia explained in a recent email they have not yet obtained information on this agreement.

Genie Energy, which boasts a strategic advisory board featuring figures such as Rupert Murdoch and Dick Cheney, has experienced civil society pushback from its efforts to develop oil shale in Israel, and this perhaps influences its media silence in Mongolia. Genie is also connected to initiatives to develop oil shale in the U.S., which has the largest known deposits in the world but where mining is not taking place. Despite years of research, oil shale has yet to be found to be economically viable. Success in Mongolia would likely improve the company’s standing in both Israel and the U.S.

Mongolia, meanwhile, has been grappling with declining foreign investment and is more open to experimentation to bring in funds. In January of 2013, foreign direct investment was just 42 percent of the level of the previous year, according to the World Bank. Oil shale, according to a recent interview in the local media with the Minister of Mining D. Gankhuyag, has been earmarked as a positive new direction for the country’s economy.

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