ONGC and Uranium Corporation to Jointly Explore and Extract Uranium

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Researched by Industrial Info Resources (Sugar Land, Texas)--Oil & Natural Gas Corporation Limited (BSE:500312) (ONGC) (New Delhi) has signed a memorandum of understanding with Uranium Corporation of India Limited (UCIL) (Singbhum, Jharkhand), a subsidiary of the Department of Atomic Energy (Mumbai), to explore and develop uranium reserves in the country. The agreement brings together ONGC's expertise in exploration, UCIL's mining and processing capabilities of uranium and the agency's exploration and research experience. ONGC and UCIL will establish a 74:26 joint venture, and UCIL will have the option to increase its stake to 49%.

According to the agreement, the two firms will set up a steering committee to prepare a time-bound program. ONGC is in the process of assessing its well logs, which indicated the trace presence of uranium in some wells. The firm announced that it had discovered traces of the radioactive mineral in 9,500 wells across India, mostly in the states of Andhra Pradesh, Gujarat, Rajasthan and Tamil Nadu. ONGC and UCIL are likely to initiate their joint exploration exercise in Gujarat.

UCIL is scouting uranium properties for potential acquisition and is also looking to procure exploration licenses overseas. The firm has been prospecting for uranium in Andhra Pradesh, Karnataka, Meghalaya and Rajasthan, but its efforts have been hindered because of environmental concerns and the nonavailability of the requisite state-of-the-art mining equipment.

UCIL undertakes uranium mining and processing activities in the state of Jharkhand in Bhatin, Jaduguda, Narwapahar and Turamidh. A common processing unit located near Jaduguda processes about 2,090 tons per day of uranium ore with an output of about 175 tons per year. A new mill was commissioned this year in Turamidh with a processing capacity of 3,000 tons per day of ore. Output from the Turamidh mill amounts to 190 tons per year.

India has modest reserves of uranium with about 54,000 tons of proven mineral resources and an additional 23,500 tons of estimated in situ resources. The country accounts for 0.8% of proven uranium reserves in the world. It is expected to require 78,000 tons of uranium to meet its target of generating 20,000 megawatts (MW) of nuclear power by 2020.

In 2007, India's uranium production from domestic mines amounted to 270 tons as opposed to 9,476 tons from Canada, 8,611 tons from Australia, 6,637 tons from Kazakhstan, and 3,413 tons from Russia. Total global production for 2007 was estimated at 41,279 tons.

ONGC is looking to restrict its presence in the nuclear power sector to explore and mine uranium. The firm does not have plans to foray into nuclear power generation. ONGC and UCIL could eventually supply uranium to Nuclear Power Corporation of India Limited (Mumbai) and NTPC Limited (BSE:532555) (New Delhi), which are setting up two 1,000-MW nuclear reactors through a joint-venture agreement.

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