(Yicai Global) Jan. 18 -- Shenwu Environmental Technology Co. and a Singaporean mineral firm are planning a coal gas production base in Mongolia to tackle the nation's air pollution woes.

Shenwu penned a memorandum of understanding with Poh Golden Ger Resources Pte. Ltd. this morning, the Beijing-based firm said. The plant is set to convert coal to produce three billion cubic meters of natural gas every year after its 2020 completion.

Mongolia's capital city, Ulaanbaatar, is one of world's most polluted cities, and the coldest capital by average temperature. Coal is its main energy source for heating.

South Korean Prime Minister Lee Nak Yon said on Jan. 16 that his administration was prepared to support Mongolia in its efforts to curb pollution, local news outlet The Korea Herald reported. Mongolian Prime Minister Ukhnaa Khurelsukh was in Seoul at the time to discuss how the countries can tackle their respective smog problems.

The plant's initial construction phase of will cover natural gas liquefaction, liquefied natural gas transport and a transit gasification station, the statement said. With the first phase complete, the base will be able to produce 100 million cubic meters of natural gas every year.

The two companies will set up a two-way joint venture in which Shenwu, which will handle the design, procurement and installation for the base, will hold 19 percent of shares. The pair will work to obtain financial support under the Belt and Road initiative.

Often compared with the ancient Silk Road, the One Belt, One Road initiative was proposed by Chinese President Xi Jinping in 2013. It is a grand 30- to 40-year plan for a vast infrastructure and trade route boasting a major network of railroads, highways, ports and pipelines embracing the continents of Asia, Europe and Africa.