SLIM HOLE GEOTHERMAL RESERVOIR CHARACTERIZATION FOR RISK REDUCTION Dennis L. Nielson DOSECC Exploration Services, LLC Salt Lake City, Utah USA

DOSECC EXPLORATION SERVICES, LLC Mission Statement DOSECC Exploration Services Designs, Builds and Applies Innovative Drilling Technology for Scientific, Natural Resource and Geotechnical Investigations

DOSECC Exploration Services Background in Scientific Drilling with a Focus on Sample Quality Geothermal Slim Hole Reservoir Characterization Innovative Equipment Design & Fabrication Lake & Shallow Marine Drilling Soft Sediment Sampling Tools Hard Rock Coring Mining Science

DOSECC Exploration Services, LLC EQUIPMENT DESIGN & FABRICATION Rapid Access Ice Drill (RAID) Design Drilling Depth: 3,300 meters Unique Fluid Circulation System-ESTISOL 140 Wireline Tools – Drilling & Coring Operating Elevation: 4,000 m Operating Temperature: -55o C Fabrication Complete-Shipped to Antarctica Field Trials in 2016

INTRODUCTION SLIM HOLE GEOTHERMAL RESERVOIR CHARACTERIZATION Geothermal Exploration is Expensive and High-Risk. In the US, Obvious Hot Spring Areas have been Drilled, and Exploration Focus is Now on Higher Risk Buried Systems. Price of Electricity Does Not Reflect Overall Level of Risk. Early Stage Exploration is Often Subsidized by Governments or International Funding Organizations

GEOTHERMAL EXPLORATION Risk is Mitigated by Specialized Knowledge Geothermal Professionals Conceptual Models Experience: Data from Both Successes and Failures Failures Not Often Publicized

SUBSURFACE RISK Impediment to Geothermal Development Resource Risk: Size and Quality of a Reservoir Drilling Risk: Well Completion and Fluid Production Mechanical Resource Sustainability Risk: Capacity to Sustain Production through Life of a Project

TRADITIONAL EXPLORATION STRATEGIES GEOLOGIC (CONCEPTUAL) MODELS and Refinement at Each Stage of Exploration Regional (>103 Km2) to Prospect (~10’s Km2) Less to More Expensive Methodologies Drilling Generates and Uses Large Amounts of Data

TRADITIONAL EXPLORATION STRATEGIES GEOLOGIC (CONCEPTUAL) MODELS and Refinement at Each Stage of Exploration Regional (>103 Km2) to Prospect (~10’s Km2) Less to More Expensive Methodologies Drilling Generates and Uses Large Amounts of Data

Standard Practice to Drill Production Wells For Reservoir Tests Reservoir Knowledge is Low and Risk is High Reasons Given: Large-Diameter Wells Required For Reservoir Engineering Slim Hole will not Produce Fluids Tradition Paradigm Shift Needed to Manage Risk

PLAY FAIRWAY RISK MATRIX (Fugelli and Olsen, 2005) High Database Confidence Low Low High Geological Model Confidence

INITIAL GEOLOGIC MODEL “PLAY” COMPONENTS Heat Source Reservoir Volume Recharge Seal ECONOMIC VIABILITY

MATURE GEOLOGIC MODEL PROSPECT to DEVELOPMENT 3-D MODEL Lithology Physical Properties Faults (Permeability) System Boundaries Fluid Chemistry SITE and DRILL SUCCESSFUL PRODUCTION WELLS

SLIM HOLE DRILLING TECHNIQUES Generally Defined as <5-inches (<12.7 cm) in Diameter. Wireline Diamond Coring Using Mining-Style Rig Hybrid Systems Using Large Rotary Rig plus High-Speed Top Drive Mining-Style Rig Using Mud Motor Rigs Not Optimized for Geothermal

RESERVOIR CHARACTERIZATION SLIM HOLE Drilling Casing   9-5/8" hole to 30 m 6-5/8" cemented 6" hole to 300 m 4-1/2" Surface cemented HQ Core 300 to HQ Liner 1200 m NQ Core 1200 to 2000 m RESERVOIR CHARACTERIZATION SLIM HOLE COST: ~$1,200,000 for 2000 meter hole. Not a Production Well with Smaller Casing! Not a Temperature Gradient Hole!

RESERVOIR CHARACTERIZATION SLIM HOLE Penetrates to Reservoir Depth Data Collection Geology (lithology, fluid inclusions, fracture density, alteration mineralogy) Geophysics (Temperature, Electrical Resistivity, Density, Magnetic Susceptibility) Geochemistry (Fluid Composition) Reservoir Engineering Production Well Design

EXPERIENCE Scientific Projects Valles Caldera, New Mexico USA Hawaii Scientific Observation Holes, Hawaii USA Geothermal Assessment of Ascension Island, South Atlantic Unocal and Other Indonesian Exploration Slim Hole Reservoir Engineering (Garg) Oguni, Japan Sumikawa, Japan Takagami, Japan Kirishima, Japan Steamboat Hills, Nevada USA Snake River Plain, Idaho USA Three ~2,000 m Reservoir Assessment Holes

RESERVOIR ENGINEERING Predict Discharge Characteristics of Production Wells based on Discharge From or Injection Into Slim Holes Confirmed by Garg and Combs (1997) Testing: If the slimhole does not flow, perform an injection test while recording fluid injection rate and temperature, and downhole (with pressure/temperature tool located close to the fluid entry) pressure and temperature. To first order: Injectivity index ~ Productivity index

Temperature - Depth Mountain Home AFB, Idaho MH-1 (1986) Tmax = 93oC @ 1219 m MH-2 Flow Zone @ 1745 m Extrapolated T ~150oC Fluid Inclusions: 150-190oC Flowing T @ 1355 m = 135oC

ARTESIAN FLOW FROM Mountain Home - 2 NQ Drill Rods Depth to Flow Zone: 1745 m (5726 ft.) Volume Estimates: 11 gpm Flowing Temperature at 1355 m: 134.6o C

RESERVOIR CHARACTERIZATION SLIM HOLE PROGRAM Systematic 3-D Sampling of the Reservoir Density: 1 to 1.5 Holes/Km2 Temperature and Permeability Distribution Reservoir Boundaries Up-Flow, Out-Flow, Recharge Design Production and Injection Well Drilling Program Holes Used for Monitoring or Injection

DRILLING COST BASELINE Geothermal Well Cost Mansure & Blankenship (2011) Crystalline Rock High Temperature Large Diameter Oil & Gas Well Costs Joint Association Survey on Drilling Costs Sedimentary Rocks Lower Temperature Multiple Well Programs

PRODUCTION WELL “SUCCESS RATE” LEARNING CURVE EFFECT Exploration Development Operation IFC (2013) 50% 74% 83% Hance & Gawell (2005) 25% 60% 80% Sanyal & Morrow (2011) 55% 75% Molloy (1982) 45% (11 wells) 15% (13 wells)

PRODUCTION WELL “SUCCESS RATE” LEARNING CURVE EFFECT Exploration Development Operation IFC (2013) 50% 74% 83% Hance & Gawell (2005) 25% 60% 80% Sanyal & Morrow (2011) 55% 75% Molloy (1982) 45% (11 wells) 15% (13 wells) No Conceptual Model to Guide Well Locations Mechanical Well Failure

GEOTHERMAL DEVELOPMENT TASKS 50 MWe (ESMAP, 2012) Preliminary Survey $ 2,000,000 Exploration $ 3,000,000 Test Drilling $ 18,000,000 Project Review & Planning $ 7,000,000 Field Development $ 70,000,000 Construction $ 91,000,000 Startup & Commissioning $ 5,000,000 $196,000,000

GEOTHERMAL DEVELOPMENT TASKS 50 MWe (ESMAP, 2012) Preliminary Survey $ 2,000,000 Exploration $ 3,000,000 Test Drilling $ 18,000,000 Project Review & Planning $ 7,000,000 Field Development $ 70,000,000 Construction $ 91,000,000 Startup & Commissioning $ 5,000,000 $196,000,000

INVESTMENT for 50MWe DEVELOPMENT ESMAP, 2012

RISK vs. INVESTMENT for 50MWe DEVELOPMENT ESMAP, 2012

GEOTHERMAL SLIM HOLES VS. PRODUCTION WELL COSTS

PRO FORMA 50 MWe PROJECT TEMPERATURE: 250o C VOLUME: 32 km3 SURFACE AREA: 16 km2 RESERVOIR DEPTH: 1000 to 3000 m DRILLING DEPTHS: 2000 m SLIM HOLE COST: $1,200,000 PRODUCTION WELL COST: $4,500,000 RESERVOIR TESTING: $250,000/WELL ASSUME 5 MWe per Production Well

PRO FORMA 50 MWe PROJECT SLIM HOLES PRODUCTION WELLS One hole/km2 = 16 Drilling : $19,200,000 Testing: $ 4,000,000 $23,200,000 OBJECTIVE: Increase PSUCCESS to 80% Due To Learning Curve Enable Decision on System Development 77% SUCCESS RATE (10/13) Drilling: $ 58,500,000 Testing: $ 3,250,000 $61,750,000

GEOTHERMAL DEVELOPMENT COSTS 50 MWe                                  

CONCLUSIONS Slim Hole Reservoir Characterization Program Provides Better Coverage at Lower Cost Compared to Production Well Drilling. Exploration is Knowledge Based as Demonstrated in the Play Fairway Approach.