Geothermal Project & Financial Drilling Risk
Management: The French option
Mr. Jacques Chouraki
III Seminario Latinoamericano y del Caribe de Electricidad
ELEC 2013 – Santiago, Chile – 4th October 2013
Geothermal Geological Risk
Olade ELEC 2013, Santiago - Chile, 3-4 October 2013
Barriers to Geothermal Development
•
The main obstacle for the development of high enthalpy
geothermal energy is directly related to the importance of
geological risk in the exploration phase but also, to a lower
extent, during the field development phase.
•
At the exploration phase, this potential risk is associated with
additional costs, which are difficult to assess and poorly
understood by the investors, thus preventing financial
implementation from banks or credit agencies.
Olade ELEC 2013, Santiago - Chile, 3-4 October 2013
Barriers to Geothermal Development
•
Currently, geoscientific studies, based on traditional geophysical
approaches (magnetotellurics (MT), gravity and magnetics), can
address the geothermal exploration drilling strategy, but the
probability of success remains low, though higher than in the Oil &
Gas exploration.
•
In this context, where the objective of achieving much higher
level of success would secure more investors towards geothermal
projects, GEOTREF is currently developing a high-end geothermal
exploration approach combining standard methods with methods
and software tools at the cutting edge of the O&G exploration.
Olade ELEC 2013, Santiago - Chile, 3-4 October 2013
Barriers to Geothermal Development
•
This new approach is globally cost-effective by reducing the risk
of making inappropriate drilling or unclear steam field
development decisions.
•
The initial investments are higher but justified by a better
understanding of the reservoir at the earliest stage of a project,
and the realization of reliable reservoir performance forecasting.
•
This is necessary, but not sufficient…
Olade ELEC 2013, Santiago - Chile, 3-4 October 2013
The Geological Risk Fund Approach
•
The Geothermal Drilling Risk Fund (GDRF), based on a contingency
grant scheme, will procure developers with easier access to
commercial financing, lower risks and lower costs for the
development of their proven geothermal field and expected
power generation plant.
•
The main requirement to implement the GDRF, beside top level
prefeasibility studies, is to aggregate a minimum number of wells
to be drilled (around 80) in a joint program to mutualize the
geological risk.
•
ADEME, the French Environment and Energy Management Agency,
has created this concept 35 years ago and has since successfully
implemented this program in France.
Olade ELEC 2013, Santiago - Chile, 3-4 October 2013
French Risk Fund Management
Olade ELEC 2013, Santiago - Chile, 3-4 October 2013
Organisation Diagram Proposal
Olade ELEC 2013, Santiago - Chile, 3-4 October 2013
Drilling Risk Fund Assumptions
 Initial Fund Amount: 150 M€
 Projects : 10 to 20 of 20/25 MW each (2/3 per year)
 Additional Prefeasibility Study Coverage : 75%
 Drilling Drilling Risk Premium: 15%
 Exploration Drilling coverage: 85%
 Field Development Drilling : to be included in the Projects
 Exploration Drilling Failure Rate : up to 34%
 Operational Royalties : 10% of the PPA Price
 Fund Duration: 23 years
Olade ELEC 2013, Santiago - Chile, 3-4 October 2013
Drilling Risk Fund Financial Simulation
Expenses
Actualized Balance including Financial Interests
Balance without Financial Interests
Olade ELEC 2013, Santiago - Chile, 3-4 October 2013
Which Steps to the Next Level ?
•
The system to be build must takes into account 3 levels and must
be sized for these 3 levels:
 Financing for complementary exploration works;
 Financing for exploration wells;
 Coverage of the geological risk for production/injection wells
according to criteria to be define.
•
The Risk Fund must be able to be financially balanced (between
the initial allocation, the fees and the royalties from the
beneficiaries, the financial incomes generated, the
indemnifications in case of project failure, management fees) and
must be sized largely enough for a minimum of 80 wells.
Olade ELEC 2013, Santiago - Chile, 3-4 October 2013
Building a Program: the Key…
•
Assessment of the geothermal works in the Andean Countries
and definition of a program of additional actions to be engaged.
•
Performing a study on the implementation of a financial support
process for the initial phases of the geothermal projects and for
covering the geothermal risks.
•
….
Olade ELEC 2013, Santiago - Chile, 3-4 October 2013
Building a Program: the Key…
•
Despite the existence of these works, there is currently no
program to appreciate what can be expected from geothermal
electricity within the next 20 years in all these countries:
 What is the number of these projects which can effectively be by built?
 What contribution can be expected from geothermal?
 What additional works should be carried out?
 What funding amounts are to be mobilized for the works to be engage?
•
These knowledge elements are essential for building up a regional
strategy for the development of geothermal energy in order to
attract industrial and financial investors (private and/or public).
Olade ELEC 2013, Santiago - Chile, 3-4 October 2013
…toward the Andean Drilling Risk Fund
•
Building such a program means to produce a review of the works
currently led for each countries and, on this base, define for the
entire region concerned a detailed program of actions to perform
within the next 20 years :
 additional studies to perform,
 exploration drilling campaigns to engage,
 …up to the construction of geothermal plants.
•
With, if possible, a planned schedule of construction and the
amount of funding to mobilize for all the program.
Olade ELEC 2013, Santiago - Chile, 3-4 October 2013
Thank you
Muchas gracias
Merci
Jacques Chouraki
jchouraki@teranov.fr
www.teranov.com
Guadeloupe – Paris – Bogotá – Mendoza
Olade ELEC 2013, Santiago - Chile, 3-4 October 2013