Cougar Energy’s (ASX: CXY) expanding Asian Strategy has borne early fruit with a Memorandum of Understanding reached with Mongolia focused Hulaan Coal Corporation for a potential underground coal gasification (UCG) project.
The MoU allows Cougar to undertake due diligence on Hulaan’s coal resources and those under its direct management in Mongolia, and assess their potential for UCG development.
“Once a suitable coal resource is identified, we will negotiate the terms under which a subsequent UCG project could be developed. We have already discussed a broad outline of such terms and look forward to a long and prosperous relationship with Hulaan,” Cougar managing director Rob Neill said.
Cougar has already undertaken a preliminary review of two coal areas with a combined resource in excess of 500 million tonnes of thermal coal.
“Much of this coal is deeper than 150 metres and subject to further analysis, is likely to be suitable for UCG. The potential for any such project will be clarified as a result of the due diligence process,” Neill added.
If UCG is found to be a suitable development option, the resulting gas production could be used to develop both small and large scale power projects for either regional use or for transmission to Mongolia’s capital, Ulaanbaatar.
Gas can also be converted into compressed synthetic natural gas for domestic use.
“This also has significant environmental benefits as it would replace the current burning of coal, and help in reducing the current pollution problems around the capital city,” Neill said.
“Mongolia is deficient in the local production of oil and gas, relying heavily on imported fuels from China and Russia, hence the conversion of UCG synthetic gas or syngas into transport fuels, is a significant longer term objective.”
The MoU with Vancouver-headquartered Hulaan paves the way for Cougar to leverage its UCG expertise for the development of a project or projects in energy-hungry Mongolia.
Mongolia has one of the fastest growing economies in the world with a booming mining industry.
Together, these factors make it an ideal factor for development of UCG projects to fuel future gas-fired power plants to replace existing aging facilities or for the longer term production of downstream petro-chemical products to improve its energy security.
Mongolia also has infrastructure in place that would facilitate exports to China, providing another potential monetisation path.
Cougar had previously said it was in talks with three companies for a potential UCG development and is now resuming its dialogue with the Mongolian Government.
This is focused on the regulatory controls relevant to the development and introduction of UCG technology, and to seek out new opportunities for the development of coal areas not suitable for conventional mining operations.
Cougar is also looking to establish and develop projects in China and Indonesia.
In Indonesia, Cougar and partner PT MedcoEnergi Mining International have assessed a range of coal deposits and have short-listed two locations in East Kalimantan and one in South Sumatra.
Negotiations are currently in progress to secure the relevant coal tenements.
China also remains an integral part of its strategy, with contact being made with a number of State Owned Enterprises to gauge their interest in establishing UCG project joint ventures.
With a market capitalisation of A$8.8 million, Cougar bears close watching.
The identification of a resource and the decision to develop a UCG project are catalysts for a sizeable uptick in the company’s valuation.
Cougar reaching a MoU with Hulaan is also a big positive, demonstrating that the company’s focus on Asia away from Australia is starting to bear fruit.
The willingness of Mongolia and other Asian countries to consider UCG as a viable option for providing clean energy gives Cougar greater certainty that its projects would receive approval at the Governmental level.
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