Providing coverage of Alaska and northern Canada's oil and gas industry
March 2015

Vol. 20, No. 10 Week of March 08, 2015

Ormat terminates Mount Spurr venture

Writes off exploration costs after failing to find viable geothermal source on the flanks of the Southcentral Alaska volcano

Alan Bailey

Petroleum News

Ormat Technologies has given up its attempt to find a viable geothermal energy resource on the flanks of the Mount Spurr volcano in Southcentral Alaska. During a fourth quarter earnings call on Feb. 25 Doron Blachar, the company’s chief financial officer, said that the company had written off $7.3 million in Mount Spurr exploration costs.

“After conducting exploratory drilling … management concluded that the geothermal resource as well as the commercial environment would not support commercial operations in the foreseeable future,” Blachar said.

Isaac Angel, Ormat’s chief executive officer, said that the write off took place during the fourth quarter of 2014. Ormat has not returned calls from Petroleum News, requesting further comment on the company’s Mount Spurr venture.

2008 lease sale

In September 2008, Ormat’s $3.5 million purchase of 15 leases on the flanks of Mount Spurr during a state geothermal lease sale raised hopes of a new renewable energy source for generating power for the Alaska Railbelt transmission grid - the leased area lay about 80 miles west of the city of Anchorage and just 40 miles from Beluga, the closest point on the grid.

With heat clearly having to exist somewhere under the ground near the volcano, Mount Spurr presented an enticing target for geothermal exploration. Ormat began its evaluation of its acreage in 2009 by conducting various forms of aerial survey, coupled with gravity and electromagnetic measurements, seeking evidence of hot water in the subsurface and geologic structures that might be targeted as geothermal prospects.

Geothermal drilling

In 2010 the company found promising indications of a geothermal source when it drilled two core holes to depths of 1,000 feet towards the eastern side of its leased acreage. Subsequently, in 2011, the company brought in a drilling rig to drill to a depth of 4,000 feet. But that deeper well proved disappointing, with no hot water and surface temperatures no higher than 140 F.

Ormat’s Mount Spurr project leader Rahm Orenstein told the Alaska Senate Resources Committee in October 2011 that the well had unexpectedly encountered a type of rock called a conglomerate, formed from detritus of various sizes, including sand, stones and pebbles. This is a type of rock that does not hold heat particularly well and there may have been mixing of warm geothermal fluid with cold glacial water from the surface, Orenstein said.

New drilling sites?

In April 2013 a consultant working for Ormat on the Mount Spurr project told the Alaska Rural Energy Conference that the company had been considering power plant options at Mount Spurr and was planning to drill again in 2014. The plan was drill farther to the west than previously, closer to the volcano’s active crater, where subsurface temperatures should be higher but where the risks posed by a volcanic eruption would also be elevated. The company anticipated some field work in 2013 to identify suitable drilling sites. And in parallel with planning the drilling, Ormat was evaluating the engineering of a suitably protected power plant, the consultant said.

However, Ormat’s hopes for Mount Spurr have clearly come to naught.

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