Perth-based Green Rock Energy is planning to become a global developer of geothermal energy projects, starting with a joint development of a disused oilfield in Hungary and evaluation of a major geothermal resource at Olympic Dam, in central South Australia.
Production testing at its Hungarian site, near the town of Ortaháza, started in January to test the sustainable flow rate of hot geothermal water from two disused oil wells. Green Rock and its joint venture partners, Hungary’s biggest oil company MOL– which is operating the project – and Icelandic geothermal specialist Enex have a 32%, 36% and 32% share in the project, respectively.
Adrian Larking, Green Rock Energy’s Managing Director, said test results are expected by the third quarter of 2007 and will be followed by the completion of a feasibility study for the development of a geothermal power plant and direct heat supply for industry. The first two wells will be tested for hot water production rates to determine the optimum development.
“During the testing, which should be completed in July, one well will be used for the production of hot water to test the sustainable production rate and the other well for injecting the water back to a separate water-bearing horizon”, Larking said. “The testing will gather detailed hot water production data on the wells and geothermal water bearing zones for the subsequent construction and operation of the planned geothermal power plant.”
He said the objective of the project is to utilise hot water produced from existing, but out of- use, petroleum wells owned by MOL to generate the heat for the establishment of a suite of 2 - 8 MWe geothermal power plants through Hungary.
Larking said the project has been underwritten for about $4.72 million by the World Bank-backed GeoFund geological risk insurance. “This will provide a refund of most of the major costs of the production testing phase in the event that flow rates are insufficient for electricity production, even if they are sufficient for the sale of direct heat to industrial and agricultural users”, Larking said.
Larking said the credentials of their Hungarian co-venturers are impeccable. “Both are highly respected energy resource companies with international connections”, he said. “MOL, a major petroleum company, is one of the largest companies in Hungary and owns the wells in Hungary. It is equivalent in size to Woodside. Enex is an Iceland-based geothermal consulting company with expertise in all aspects of geothermal resources and is an active participant in geothermal and hydro energy projects including geoscientific research, project development, engineering, procurement and construction of power plants.”
Green Rock’s 100%-owned Olympic Dam Geothermal energy project comprises 2,899 km2 of geothermal tenements surrounding BHP Billiton’s Olympic Dam copper mine. “The aim is to develop a geothermal power plant with capacity in excess of 500 MWe to supply electricity to the mine and surrounding area”, he said.
“The Olympic Dam location was chosen due to the combined factors of potential suitable hot rocks and an immediate market for the sale of electricity. The Olympic Dam mine presently consumes around 130 MW of electricity and has indicated an electricity usage in excess of 500 MW following completion of their planned expansion in 2013. Olympic Dam is also connected to the eastern Australian main power grid. The planned geothermal power plant will be within 10 km of this high voltage power line.”
Green Rock has recently completed an exploration well to a depth of just over 1.9 km to test the nature of the geology and the heat capacity of the rocks at Olympic Dam. “We have cored through in excess of 1,200 m of hot granites beneath the insulating sediments which trap the heat in the granites”, Larking said. “The results from this well have confirmed the potential extent of the geothermal resources of these hot granites, their simple and homogenous nature and potential amenability to fracture stimulation within a compressional stress setting which should assist the fracture stimulation.”
“The next step is to complete a mini-fracture stimulation program within this exploration well to provide the data to design and prepare for two deep geothermal evaluation wells (to 5 - 5.5 km) and a six month water flow testing program. The deep evaluation wells and associated water flow testing will provide the confidence to commit to the development of the Olympic Dam geothermal power project. The mini-fracc will occur early in 2007. The drilling of the two deep geothermal wells will then occur following a six month design and preparation process.”
Larking said the Olympic Dam geothermal project will be a massive world class, long life project with huge potential value. “Proving the value of the project requires the drilling of the two deep evaluation wells and associated water flow testing which will cost in the order of $20 million. To minimise the capital requirement from Green Rock Energy shareholders, we are approaching major energy companies to take an equity interest in the project through a farm-in or similar structure.”
He said electricity generation companies are generally risk averse, preferring to purchase rather than develop the energy source and to simply own and operate the power plant. “Accordingly we are seeking a major energy or similar company that is familiar with exploration / evaluation risk that can see the huge potential value and is willing to risk what is, when compared to the size of the prize, a small evaluation cost”, he said.
Larking said the key technical differences between those two geothermal energy projects principally relates to the water/heat source.
“In the Hungary project, we will tap the heat from hot water that already exists in underground”, he said. “We will use existing petroleum wells to recover hot geothermal water trapped in natural reservoirs in sedimentary limestone.”
“At the Olympic Dam geothermal project we will drill new wells into hot dry granite and pump water down the wells and circulate the water through the fractured reservoirs engineered by us at depth in the hot dry granite. The reservoirs will consist of a network of fractures opened up in the hot granites by pumping the water under pressure into them and connecting the injection and production wells.”
“In both the Hungarian and Olympic Dam projects the power plant technology at the surface is readily commercially available and has a high reliability. The technologies to drill and engineer the fracture network in the Olympic Dam project have been developed internationally.”
Larking said geothermal power is the most environment friendly of all the renewable and non renewable power sources. He said the footprint on the land is the smallest of all power sources and the visual impact is minimal as the building housing the power plants has a low profile. “Zero green house gases are produced because of the enclosed nature of the water flow of the hot dry rock geothermal process”, he said.
“Geothermal energy is a base load power source and does not require backup or storage systems, unlike the other renewable energy sources which are intermittent such as wind, which typically produces electricity less than 25 -30% of the time and solar only during daylight.”
“As it is classified as a renewable energy source under Australia’s and Hungary’s energy legislation, geothermal energy attracts carbon credits, or similar incentives/ subsidies. The location of the Olympic Dam geothermal project is in itself a commercial advantage. High voltage power transmission lines typically cost in excess of $500,000 per kilometre. Being situated within 8 km of the world class Olympic Dam mine and within 5 km of the high voltage power line which forms part of the Eastern Australian power grid, we can incrementally develop the power plant, thus significantly reducing the development risk.”
Larking said Green Rock is looking at starting with a small, 10MWe to 20MWe, geothermal power plant then incrementally adding to the plant to a point where there could be a combined geothermal power plant in excess of 500MWe. “The nature and volume of the hot granites are also a commercial advantage”, he said. “Our preliminary studies indicate we can potentially develop a 500MWe plant with a life in excess of 40 years.”
Larking said Green Rock’s long term growth strategy is to become a developer of renewable, clean, green geothermal energy projects with a strong commercial focus. “The company is looking to take projects from greenfield to production by developing geothermal projects with near term cash flow generation potential”, he said.
“It will achieve this by identifying projects that have excellent commercial potential from their location close to existing infrastructure, access to existing power lines and markets and attractive energy sale prices. This will enable the projects to be scaled up in stages as the geothermal resources are tapped.”
“The company plans to benefit from increasing demand for renewable energy, expectations of continuing increases in electricity prices, especially those derived from fossil fuels, and expectations of reducing capital and operating costs.” Green Rock also has applications for additional geothermal leases in Australia.