Indian contractor Megha Engineering and Infrastructure (MEIL) has been awarded a $648m contract to build Mongolia’s first greenfield oil refinery.

The agreement was signed in Ulaanbaatar on Friday.

The Hyderabad-based company was chosen as a result of a previous agreement between the two countries.

The refinery will process around 1.5 million tonnes of crude oil a year, producing gasoline, diesel, aviation fuel, and LPG for Mongolia’s domestic market.

Rajesh Reddy, president of MEIL’s hydrocarbons division, said the project will be the company’s third in Mongolia.

As well as the refinery itself, MEIL is overseeing the construction of utilities and plant buildings valued at $600m. It will also build a power plant for the refinery, expected to cost $190m.

The total value of the three projects is put at $1.4bn.

MEIL saidthe refinery will reduce Mongolia’s reliance on Russian oil imports and its vulnerability to fluctuations in international oil markets.

The project manager for the scheme is Engineers India, or EIL. Completion is expected in 2025.