South Korea and Mongolia will engage in a "clean coal" development project that can improve energy efficiency of the fossil fuel resource, the government said Tuesday.

   The memorandum of understanding (MOU) reached between the two countries in Seoul calls for South Korea to transfer technology related to upgrading coal quality used for heating and power generation, the Ministry of Knowledge Economy said.

   It also outlined the creation of a joint venture company and cooperation in the development of coal mines and other mineral resources in the landlocked Asian country.

   The pact, in addition, calls for eco-friendly dimethyl ether production that can be used like diesel oil or liquefied petroleum gas.

   Besides supporting projects that can allow Mongolia to make better use of its energy resources, South Korea will also seek to secure stakes in coal mines that can better insulate it from sudden hikes in international prices and supply shortfalls.

   The ministry said that Korea Gas Corp., Korea Coal Corp., POSCO and SK Innovation Ltd. are interested in developing resources in Mongolia.

   Mongolia is estimated to have 12.6 billion tons of coal, roughly 1.5 percent of the world's total, and is rich in other resources. (Yonhap News)