Oil and Natural Gas Corporation (ONGC) has successfully drilled two geothermal wells in Ladakh, marking India's first demonstration-scale geothermal power project. The initiative aims to provide reliable, round-the-clock renewable energy. Investors should monitor how the company scales this technology and manages the high capital costs associated with geothermal development.
Detailed Coverage
Oil and Natural Gas Corporation (ONGC) has reached a technical milestone by completing two deep geothermal wells in the Puga Valley of Ladakh. These wells, drilled to a depth of approximately 1,000 meters at an altitude of over 14,000 feet, are designed to tap into underground temperatures exceeding 200°C. This project serves as a demonstration unit for India’s first geothermal power plant, which is expected to generate 1 MW of continuous, renewable electricity.
Scaling Geothermal Energy Potential
Unlike solar or wind power, which depend on weather conditions, geothermal energy uses the Earth's internal heat to provide a constant power supply, often referred to as baseload power. The Geological Survey of India has identified a national potential of approximately 10,600 MW, with 381 identified hot springs across the country. While the Puga Valley project is a small-scale pilot, it provides essential data that could help ONGC and the government assess the feasibility of large-scale commercial geothermal plants in regions like the Himalayan belt, the Northeast, and parts of Maharashtra and Gujarat.
Financial and Policy Context
The project marks a shift in India’s renewable energy strategy, supported by the National Policy on Geothermal Energy notified in September 2025. One of the primary hurdles for geothermal development in India is the high upfront capital cost, which is estimated at approximately ₹36 crore per megawatt. To address this, the government has introduced viability gap funding and allowed 100% foreign direct investment to encourage private sector participation. For investors, the long-term impact on ONGC’s balance sheet will depend on whether the company can successfully transition from pilot projects to cost-efficient commercial operations without significant cost overruns.
Operational Risks and Past Challenges
The Puga Valley initiative has not been without difficulties. ONGC had previously paused drilling efforts due to complex technical challenges and environmental concerns regarding the management of mineral-rich water discharge. While the recent completion of the wells indicates that these issues have been managed, the project’s history highlights the risks associated with drilling in extreme high-altitude environments. Similar to the exploration risks inherent in traditional oil and gas drilling, geothermal projects require significant technical expertise and carry the risk of cost increases if geological conditions prove difficult.
Other public sector entities are also entering this space, with Oil India Limited exploring potential projects in Assam and Arunachal Pradesh, and Singareni Collieries Company Limited commissioning a smaller 20-kW pilot plant in Telangana. As India continues to diversify its energy mix, the performance of these demonstration plants and the government’s commitment to financial incentives will be the key indicators to track. Investors may watch for future updates on project commissioning, the actual cost of generation compared to traditional renewables, and any further government directives that could expand geothermal operations nationwide.