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Ormat still optimistic on Mount Spurr Geothermal drilling in 2011 proved disappointing but company is working with the state to prepare a revised exploration plan Alan Bailey Petroleum News
Anxious to dispel recent rumors about Ormat Technologies’ Mount Spurr geothermal project being a bust, on Oct. 20 Paul Thomsen, Ormat’s director of policy and business development, assured the Alaska Senate Resources Committee that the project is still alive and well.
“We’re still very excited about the Mount Spurr project,” Thomsen said. “We think this can offer a source of clean, reliable, field-proven, base-load power to the (Alaska) Railbelt.”
Ormat thinks that geothermal energy at Mount Spurr, an active volcano about 75 miles west of Anchorage, might support a 50 to 100 megawatt power plant.
Multiyear program In 2008 the company leased 36,000 acres of state land for geothermal exploration on the flanks of the volcano. In the summer of 2009 the company embarked on an exploration program, initially involving various forms of aerial survey, coupled with surface gravity and electro-magnetic measurements. In the summer of 2010 the program progressed into the drilling of two core holes to depths of 1,000 feet, seeking evidence of underground heat and water that might support the generation of electrical power.
With the drilling in 2010 having produced some very promising results, Ormat proceeded to the drilling of a deeper well in the summer of 2011. That well, drilled to a depth of 4,000 feet, proved disappointing: The downhole temperature was only about half of the minimum level of 350 F needed for a viable geothermal system, said Rahm Orenstein, Ormat director of business development and project leader for the Mount Spurr project.
Apparently the well 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 explained.
“We are at the stage now of analyzing that work … and updating our 3-D geological model,” Thomsen said.
New plan Thomsen said that Ormat is working with state geologists to come up with a new exploration plan, taking account of the results from the 4,000-foot well. The prime focus is to drill into some more suitable rock, changing location or drilling deeper to penetrate the base of the conglomerate. One possibility under consideration is to bring in a heavy-duty rig in 2012 to drill a much deeper well.
“We are … working with the state and we think some of the best talent in Alaska to make this project happen,” Thomsen said.
The lack of success in locating a geothermal source with the 2011 well has caused Ormat to extend the time frame for the exploration phase of the Mount Spurr project, with the planned geothermal resource confirmation phase of the project now moving from 2012 to 2013. However, Ormat still hopes to be able to bring a geothermal system on line in 2016, Thomsen said.
After having spent $3.5 million dollars in acquiring its Mount Spurr leases, Ormat is paying about $100,000 per year in lease rent and has so far spent about $3 million on its exploration efforts, Thomsen said. The state has so far contributed $2 million to the exploration.
The state has appropriated another $12.5 million for the 2012 financial year for the Mount Spurr project and there is a $2 million Alaska Energy Authority grant still to be used. Ormat is working closely with the Alaska Department of Natural Resources and AEA on updating the scope of work for the project, Thomsen said.
Ice road Orenstein said that bringing in a larger rig for deep drilling would probably require the construction of an ice road to the drilling site. The total cost of the drilling operation, including ice road construction, would likely to run to about $11 million. However, since Ormat had already planned on using a heavy duty rig to drill production and injection wells for the geothermal power plant, the ultimate impact of deeper exploration drilling on the overall project economics is uncertain, Orenstein said.
Commercial geothermal plants typically involve geothermal sources at depths ranging from 3,000 to 5,000 feet, and Ormat has developed systems with sources as deep as 8,000 feet, Orenstein said. However, the economics and viability of a specific geothermal system depend on both the depth and temperature of the source — the deeper the source the hotter it needs to be, he said.
Discussions with utilities Ormat has projected a cost of 12 cents per kilowatt hour for Mount Spurr power and is still in discussion with Railbelt power utilities, trying to achieve an agreement on power sales. That projected power cost is higher than the avoided cost of five to 10 cents per kilowatt hour of the power that the Mount Spurr power would replace. However, while those avoided costs will likely rise over time, the cost of the geothermal power would remain constant, Thomsen said. And, being stable, base-load power, the geothermal power would not incur the power grid integration costs associated with some other forms of renewable energy, he said.
Geothermal energy development requires high up-front capital expenditure and involves risks in finding workable resources, Thomsen said. Worldwide there have been many successful geothermal projects but all have involved support from government policies, he said. In Alaska, Ormat appreciates state support through royalty legislation and grants, Thomsen said. And there has been great community support from the village of Tyonek, the Kenai Peninsula Borough and Anchorage, as well as from the Railbelt utilities, he said.
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