Tavan Tolgoi power station (Rio Tinto)
|This article is part of the CoalSwarm coverage of Mongolia and coal|
The Tavan Tolgoi power station (Rio Tinto) is a proposed 450-megawatt (MW) coal-fired power station to provide power for the Oyu Tolgoi copper mine in Mongolia.
The plant was originally planned for Oyu Tolgoi, but in 2018 was moved to Tavan Tolgoi.
The map below shows the location of the Tavan Tolgoi coal field, the approximate location where the plant is proposed in Mongolia.
Initial plant plans
The proposed plant is for the power supply of the Oyu Tolgoi mine, a combined open pit, and underground gold-copper ore project within the south Gobi Desert. The site was discovered in 2001 and was developed as a joint venture between the Government of Mongolia (34%) and Turquoise Hill Resources (66%). Rio Tinto owns 51% of Turquoise Hill Resources and is the manager of the Oyu Tolgoi project.
On October 6, 2009, the Mongolian Parliament ratified the Oyu Tolgoi Investment Agreement between the Mongolian government and Ivanhoe Mines and Rio Tinto. The 2009 agreement between the Government of Mongolia and the companies developing the Oyu Tolgoi copper project outlined two possible long term power options. One was a coal-fired power station which supplied power to the mine complex, and the other was a coal-fired power station within the mine lease area of the project. Oyo Tolgoi is currently sourcing power from China and wants a domestic power supply by the second half of 2017. (See Oyu Tolgoi Investment Agreement and power supply for more details).
In its 2012 Environmental and Social Impact Assessment (ESIA) of the project the Oyo Tolgoi joint venture company set out three phases of how power supply would be provided for the project. In the initial construction phase it would rely on on site diesel generation then source power from the Inner Mongolia Autonomous Region of China, "supplied to the Mine Licence Area via an Oyu Tolgoi-owned 220kV power transmission line from the Mongolia/China border for project commissioning and early operations." In the longer term operational phase the company stated that power would be sourced via a coal-fired power plant within the Mine Licence Area. The environmental impacts of the proposed coal plant were not addressed in the initial environmental impact statement. However, the company stated that the impacts would be addressed in a supplemental report.
The company also stated that "Oyu Tolgoi is in the process of designing and permitting a coal-fired power plant within the Mine Licence Area. An environmental and social impact assessment to meet the applicable requirements of International Finance Corporation (IFC) Performance Standards and the European Bank for Reconstruction and Development (EBRD) Environmental Policy is currently being undertaken. Due to the fact that designs are not yet finalised and the assessment is still at an early stage, this will be reported as a Supplemental report to this current ESIA".
In the ESIA Oyu Tolgoi stated that the Detailed Environmental Impact Assessment (DEIA) approved by the Mongolian Ministry for Environment and Tourism (MINET) "describes a power plant comprising 3 x 150MW units, with provision for subsequent expansion to a total of 5 x 150MW units (with room for a sixth unit in the Project layout)."
The 2012 ESIA also stated:
- "Oyu Tolgoi will require 3 x 150MW units to meet its power requirements once commercial production commences. Oyu Tolgoi's preference is to obtain additional power for any further expansion of its operations from the power plant proposed for the Tavan Tolgoi project in the southern Gobi region. However Oyu Tolgoi will also consider the option to build a fourth 150MW unit for this purpose. Oyu Tolgoi has accelerated the development of the Power Plant and expects to award an EPC contract for construction of the Power Plant in 2012. Construction is expected to commence immediately after the EPC contract is awarded, subject to the necessary approvals being in places."
The mine began construction as of 2010 and shipped its first batch of copper on July 9, 2013.
Focus switches to Tavan Tolgoi plant as an alternative
The Oyu Tolgoi power station was one of two options for the domestic power supply for the Oyu Tolgoi mine, with the other being a coal plant in Tavan Tolgoi, near coal deposits. In 2013 the Mongolian government was proceeding with seeking bidders for the development of a 450MW coal plant at Tavan Tologi, with a project tender eventually awarded to Japan’s Marubeni Corporation in 2016, the Tavan Tolgoi power station (Marubeni). Plans for a coal plant in Oyu Tolgoi therefore appeared to be cancelled.
In March 2016, more than 2,000 demonstrators from Mongolia gathered in Ulan Bator’s Freedom Square criticizing foreign mining concessions. They criticised efforts to revive the Tavan Tolgoi coal project, "alleging that members of around two dozen influential families with ties to both ruling Mongolian Democratic Party and opposition Mongolian People’s Party stand to benefit the most from the deal through their ownership of shares in the Hong Kong-listed Mongolian Mining Corporation," according to the AP.
In February 2018, the Mongolian government ended a deal that allowed Rio Tinto to source power for the Oyu Tolgoi mine from China, with the company told that it had four years to find a domestic supplier. One option under consideration was to buy electricity from the proposed Tavan Tolgoi power station (Marubeni). However, Rio Tinto rejected the idea, saying "the Tavan Tolgoi Power Project currently lacks a lead investor" to secure financing and "would therefore not be operational within four years". Instead, Rio again proposed building the Oyu Tolgoi power station and called on "the [Mongolian] Minister of Energy to ensure the necessary permits and approvals are in place, including the application of permits that were submitted for renewal in January 2017, but which have not been granted."
In September 2018, it was reported that Rio had invited three state-owned Chinese firms - Power Construction Corp, China Machinery Engineering Corp, and Harbin Electric International - to submit bids to build a power station at Oyu Tolgoi for a cost of up to US$1.5 billion, and had yet to make a final decision on a go-ahead. Rio also has yet to have its permits for the Oyu Tolgoi plant renewed by the Mongolian government, according to a government source. Rio Tinto's Oyu Tolgoi LLC currently pays about US$100 million a year to import electricity from China for its Oyu Tolgoi mine.
However, in October 2018 it was reported that the Mongolian government and Rio had reached an agreement to build a coal plant at Tavan Tolgoi to power the Oyu Tolgoi mine, although plans for a power station at Oyu Tolgoi were still "open".
In December 2018 Rio Tinto announced the signing of a Power Source Framework Agreement (PSFA) between Oyu Tolgoi and the Government of Mongolia. Under the agreement, a 300 megawatt coal plant would be majority owned by Oyu Tolgoi LLC and situated close to the Tavan Tolgoi coalfields. Construction is scheduled to start in 2020 following studies, with the commissioning of the plant by mid-2023. In its media release Rio Tinto indicated that substantial further work on the details of the project remained to be finalised: "All Oyu Tolgoi shareholders will now work on the further technical specifications and commercial arrangements underpinning the framework agreement."
In February 2020, Oyu Tolgoi submitted a feasibility study for a Tavan Tolgoi Power Plant, with an estimated cost of US$924 million.
A January 2022 piece in the Mongolian Mining Journal states: "the construction and installation of the coal processing plant will begin in the first quarter of 2022 and the plant will start operating in the second quarter of 2023... An international open tender was announced on October 21, 2021, and the contractor shall be selected within 90 days."
A March 2022 piece states that the Ministry of Energy has extended the tender twice. Seven companies participating in the tender "do not meet the requirements" and "there is no denying that the interests of Chinese companies and the authorities and corruption are behind the construction of the Tavan Tolgoi power plant".
Government to finance project
In April 2020, the Mongolian Minister of Energy notified Oyu Tolgoi of the government's decision to develop and fund a state-owned power plant.
The underlying message was that the government would now be playing a more active role than before. The plant would have more generating capacity – 450 MW – than the 300 MW envisaged in the Turquoise Hill Resources’ feasibility study, but its projected cost of $600 million would still be less than the $924 million that Turquoise Hill Resources had offered. In other words, this meant that the electricity from the plant would be 50 percent cheaper than suggested in the study.
Turquoise Hill Resources was unable to reach an agreement with the Mongolian Government over the proposed 300 MW coal plant. In late 2019, the company said it had agreed on a power source framework agreement with the government to mutually agree on the project details with the aim to begin construction in 2020. The agreement set April 14, 2020 as the deadline to agree on the project. Having failed to meet the deadline, both parties assessed whether to continue with the current grid supply from China, or alternatively, a renewables option or a power plant at the site of the Oyu Tolgoi copper and gold mine. If they failed to reach agreement by June 14, 2020, the decision on power supply would be up to the company.
On June 28, 2020, the Government of Mongolia and Oyu Tolgoi LLC signed an MoA for the plant, which included signing a Power Purchase Agreement by March 31, 2021. Construction was planned for July 2021 and commissioning by 2025.
According to September 2020 reporting, the Government's Action Plan for 2020-2024 appeared to provide for the construction and commissioning of a 400 MW plant at the site and the feasibility study was completed.
An April 2021 Energy Regulatory Commission posting noted that a 450 MW plant would be implemented over a period of 42 months and would require a total investment of US$808.2 million. "The project's technical, economic and environmental impact assessment and other necessary documents have been completed, and a tender for the selection of a contractor is currently underway."
In April 2021, the Minister of Energy also stated (Google translation):
- "Once the Oyu Tolgoi project is up and running, the agreement stipulates that the power must be supplied domestically. Oyu Tolgoi wants to build the plant itself, but we can't because of the increase in investment. Then the private sector tried to build it, but failed. As of today, 30 percent of the Tavan Tolgoi thermal power plant is to be owned by Erdenes Tavan Tolgoi. The remaining 70 percent is being financed by the Development Bank. The Minister of Finance has said he is ready to provide a guarantee. The contractor for the construction of the Tavan Tolgoi power plant will be selected."
April 2021 news highlighted that Mongolia’s state-owned Erdenes Tavan Tolgoi was seeking to raise 2 trillion tugriks (US$700 million) from a two-year bond issue to fund the construction of rail infrastructure to connect the Tavan Tolgoi coal deposit to the Chinese market. The Tavan Tolgoi mine had suffered repeated setbacks over the last decade including failed plans to list the company on international stock exchanges. Tavan Tolgoi planned to spend US$3.4 billion over the next five years including for water pipelines, a coal washing plant and a 450 MW coal power plant to supply Rio Tinto’s Oyu Tolgoi copper mine and processing plant.
As of June 2021, the proposal appears permitted, but it was unclear if a project contractor had been selected.
According to a government portal updated November 2021, the financing proposed was: $ 808.2 million / "Erdenes Tavan Tolgoi JSC 30%, 70% government guarantee and performance." The project implementation period was 2021-2025.
The Mongolian Mining Journal featured a helpful 2009 to 2020 project timeline in September 2020.
- Sponsor: Erdenes Tavan Tolgoi (formerly Oyo Tolgoi LLC)
- Parent company: Erdenes MGL (formerly Rio Tinto)
- Location: Tavan Tolgoi, Mongolia
- Coordinates: 43.625, 105.474167(approximate)
- Status: Permitted
- Gross Capacity: 450 MW
- Projected in service: 2025
- Coal Type:
- Coal Source: Tavan Tolgoi mine
- Source of financing: see above
Articles and resources
- Rio Tinto, "Oyu Tolgoi," Rio Tinto website, accessed June 2021
- "Investment Agreement between the government of Mongolia and Ivanhoe Mines Mongolia and Ivanhoe Mines and Rio Tinto International Holdings," Government of Mongolia, October 6, 2009
- Oyu Tolgoi, "Oyu Tolgoi Project-ESIA," July 31, 2012, pages 4-5
- Oyu Tolgoi, "Oyu Tolgoi Project - ESIA: Introduction and background," July 31, 2012, page 8
- Oyu Tolgoi, "Oyu Tolgoi Project - ESIA: Introduction and background," July 31, 2012, page 71
- Oyu, Tolgoi. "Oyu Tolgoi begins concentrate shipments". Oyu Tolgoi. Archived from the original on 31 August 2013. Retrieved 15 October 2013. Cite uses deprecated parameter
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Related GEM.wiki articles
- Oyu Tolgoi LLC, Oyu Tolgoi Project - Section A: Introduction and background: Chapter A4: Project Description," Environmental and Social Impact Assessment, July 31, 2012 (Pdf)