The ASX-listed company will be granted due diligence over Hulaan’s assets, which Cougar said included a preliminary 500 million tonnes of thermal coal.

While more work needs to be done, Cougar said because most of the coal was deeper than 150m, it was suitable for UCG development.

After due diligence, the parties would discuss the terms under which a UCG project could be delivered, but Cougar told the market this morning that the broad strokes of such a deal had already been discussed.

It is also looking broadly at the commercialisation route for any gas brought up via the UCG process, including electricity generation into Ulaanbatar or compressing the gas into a syngas.

“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 long-term objective,” Cougar chief executive Rob Neill said.

Cougar has been hard at work looking for UCG opportunities in Asia since the now infamous Kingaroy plant closure in Queensland.

It replaced Len Walker with Neill, citing his experience in consulting in Asia as a key reason for making the switch.

Walker remains a non-executive director at Cougar.

Cougar has also put its coal assets in Queensland up for sale.

This article first appeared in ILN's sister publication EnergyNewsBulletin.net.