Coal, copper and gold are Mongolia's key exports. Yet the windswept sands of the Gobi desert could soon see another resources boom as China transitions to renewable energy generation.
Elixir Energy, an Australia-listed gas exploration company, is conducting appraisal work on a natural gas reservoir in the Gobi and is also developing a pilot plant that would create green hydrogen for export to China.
"Hydrogen is vital to a net-zero in the next 30-50 years," Elixir Energy CEO Neil Young explained to Mongolia Weekly.
According to Young, high-intensity operations like manufacturing steel or cement require huge amounts of energy beyond the capacity of available renewable resources, meaning most future energy mix forecasts include hydrogen.
As China targets net-zero carbon emission by 2060, Elixir Energy is looking to export Mongolia's green hydrogen energy to customers in northern China, such as major steel operations in the Inner Mongolian city of Baotou.
Young says: "China is the world leader in steel manufacturing, and other than coking coal, hydrogen is the only identified alternative energy source for making steel. That market is enormous.
"We can validate the concept by creating a pilot plant that puts Mongolia's renewable energy through an electrolyser to create green hydrogen and truck it to a steel mill in Baotou, China, that would use hydrogen instead of coking coal."
Elixir Energy believes that green hydrogen created next door to China has significant competitive advantages over other sources, such as Australia, due to the sheer cost of moving hydrogen by sea.
"There's a global industry in moving liquified methane and in theory, you can do the same thing with hydrogen, but economically it’s far more expensive," Young explains. "It takes much colder temperatures to liquefy hydrogen and then you need certain high-quality metals to store it without causing embrittlement and cracking. It's four to five times more costly to move hydrogen by boat than methane.
"Mongolia is proximate to large demand nodes for green hydrogen in China and could supply it by pipeline. That's a huge cost advantage."
The planned 10-megawatt pilot plant would demonstrate the proof of concept, and if successful would underwrite the construction of a cross-border pipeline with possible development funding from private sector players and international financial institutions.
Young is also optimistic about Mongolian ethnic and cultural connections on both sides of the border, as his Mongolian colleagues would engage with the Chinese provincial government and ethnic Mongolians in China.
"The Chinese government has already initiated policies and put money into hydrogen," he says. "The ultimate risk is that the demand for hydrogen is contingent on governments legislating to follow through on their net-zero commitments. If they don't, it's a product that doesn't have a home.
"Let's assume they will because if so, the lowest-cost supplier wins – and for northern China, the lowest cost foreign supplier is Mongolia. Energy industry experts believe China will be a major hydrogen importer and an indigenous producer."
The government of Mongolia is indeed providing a supportive policy environment by pushing to diversify the country’s exports to China. During Prime Minister Oyun-Erdene's recent visit to Beijing, energy exports were a big-ticket item on his talking points with top Chinese officials.
In this sense projects like Elixir Energy's could propel green hydrogen investments into Mongolia while helping China meet its net-zero goals.
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