THE POTENTIAL OF GEOTHERMAL ENERGY A ONCE AND FUTURE FOCUS OF THE BUREAU OF ECONOMIC GEOLOGY

THE POTENTIAL OF GEOTHERMAL ENERGY Summary An underestimated and largely untapped resource Not Geographically limited, as hydrothermal sites are Less costly than solar or wind, in ¢ per KWhr Largest return on investment of R&D Dollars Renewable, small footprint, negligible emissions BEG’s skills in reservoir characterization, flow modeling and carbon sequestration are directly applicable to geothermal energy assessment and development. THE POTENTIAL OF GEOTHERMAL ENERGY An underestimated and underutilized resource Not geographically limited, as hydrothermal resources are Renewable, small footprint, negligible emissions Less costly than solar or wind, in cents per kilowatt hour Largest return on investment of R&D dollars BEG’s skills are directly applicable. Bruce L. Cutright

THE POTENTIAL OF GEOTHERMAL ENERGY Bureau of Economic Geology lead earlier studies during the late 1970s, 1980s and up to 1992 investigating the Geothermal Energy potential of the Northern Gulf of Mexico History at BEG Don Bebout and Bob Loucks, among others lead research in 1970s to 1990s. Oil prices dropped, and research dollars disappeared Bebout, Loucks, Gregory 1978 Bruce L. Cutright

THE POTENTIAL OF GEOTHERMAL ENERGY What Changed from 1980 to Today? Advances in Drilling Technology that made 8 to 10km holes possible (polycrystalline diamond compact bits, slimhole drilling) Advances in controlled fracture development that made “Engineered Geothermal Systems” practical Advances in Binary-Cycle Heat Exchange Systems that made 100o C heat sources and up economical. What has changed since the 1980s to 1990s? Advances in drilling technology that has now made 6 to 8 kilometer drill holes possible, polycrystalline diamond compact bits, slimhole technology Advances in controlled fracture development, directional drilling All of these have allowed a redefinition of the resource base, and Advances in binary cycle heat exchange systems Bruce L. Cutright

Leveraging the Past to Define the Future The basics: Geology Stratigraphy Structural geology; fractures, stress fields Fluid flow Heat flow Reservoir Characterization Yield, Thermal Characteristics, Future Predictions Reservoir Management, Restoration and Maintenance Economics. Bruce L. Cutright

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Bruce L. Cutright

THE POTENTIAL OF GEOTHERMAL ENERGY Critical Re-assessment: DOE - MIT (2006) Study Found: THE EXTRACTABLE RESOURCE BASE IS ESTIMATED AT 2,000 TIMES THE ANNUAL PRIMARY ENERGY CONSUMPTION OF THE UNITED STATES IN 2005. OVER HALF OF THIS ENERGY IS IN GEOPRESSURED ZONES IN THE NORTHERN GULF OF MEXICO Key point is now, what is the magnitude of the resource? The short answer is, there is from 1,200 to 2,000 times the annual primary energy needs of the United States in extractable geopressured-geothermal resources. The majority of this reserve is in the northern Gulf of Mexico Sediment Thickness Map of US Bruce L. Cutright

THE POTENTIAL OF GEOTHERMAL ENERGY Table 1.1 Estimated U. S. Geothermal Resource Base to 10km Depth by Category (Modified from "The Future of Geothermal Energy, MIT 2006) Category of Resource Thermal Energy, in ExaJoules (1EJ = 1018 J) Thermal Energy in Barrels of Oil Equivalent Hydrothermal 2.40E+03 9.60E+03 4.13E+11 1.65E+12 Co-Produced Fluids 9.44E-02 4.51E-01 1.62E+07 7.76E+07 Geopressured Systems 7.10E+04 1.70E+05 1.22E+13 2.92E+13 US Primary Energy Consumption (2008) 94.14 1.81E+10 COMPARISON OF FOSSIL FUEL EXTRACTABLE RESERVES TO GEOTHERMAL GEOPRESSURED/CO-PRODUCED FLUIDS EQUIVALENT ENERGY RESERVES Source Estimate of Extractable Reserves Reference Canadian Tar Sands 300 BBLSOE Edwards, 1997 Orinoco Heavy Oils 267 BBLSOE Green River Shales 139 BBLSOE U. S. Proven Reserves of Crude Oil 21.3 BBLSOE EIA 2008 Geothermal Geopressured Geothermal Resources 29,200 BBLSOE Blackwell, 2006 Magnitude of the resource In comparison to annual energy use of the US In comparison to other, Unconventional Resources In rough numbers, over 100 times what might be available from shale oils, tar sands or heavy oils. Bruce L. Cutright

THE POTENTIAL OF GEOTHERMAL ENERGY Comparison of the costs per kilowatt hour to generate electricity from alternative/renewable sources versus hydrocarbon sources How does the production of electricity by geothermal energy compare with other “Renewables”? Cheaper than Wind, Photovoltaics, concentrating Solar. Competitive with Oil and Natural gas. Still more expensive than coal or hydroelectric But will compete with coal if a carbon tax is imposed. Geothermal is cost competitive with oil and natural gas and is less expensive than solar and wind. Only coal, without carbon tax costs, is less expensive than geothermal Data from NREL in constant 2005 dollars Bruce L. Cutright

What Our Partners are doing Chevron is the largest producer of geothermal energy in the world, with operations in Indonesia and the Philippines. US energy companies Unocal and Gulf Resources are willing to invest US$1.2 billion in geothermal and natural gas projects in the Philippines What are our partners doing? Chevron, for example is the largest producer of electrical energy using geothermal resources in the world, but none of this is in the US. Unocal and Gulf Resources are investing substantially in the resources EXXONMOBILE still reports, in their 2008 annual report, that geothermal energy is “geographically limited” In case no one told them, so is oil. Source: Chevron Geothermal Bruce L. Cutright

What are our Industrial Partners Seeing What are our Industrial Partners Seeing? The Classical, but limited, hydrothermal/magmatic resource The world-leading geothermal energy company Reykjavik Energy (Orkuveita Reykjavikur) has established US$800 million in capital to invest in new geothermal projects Why haven’t our partners focused more on geothermal energy? Still perceived as a geographically limited resource Still perceived as messy, polluting, problems with fluid disposal. But these projects are hydrothermal sites that are limited in geographic extent. Bruce L. Cutright

What Our Partners are doing Binary Cycle Rankine Engine Raser Technologies Hatch Geothermal Power Plant constructed in just six months Modular power plant design. Can produce power from geothermal resources that were previously thought to be not hot enough for commercial power production. The new paradigm is Raser Technologies Binary Cycle Rankine Engine Modular, efficient. Bruce L. Cutright

What the Business is doing The Market reflects this new technology efficiency. Comparison of ExxonMobil, Chevron and BP’s 5 year stock price history to Ormat Technology’s 5 year history. Five Year Stock Price Trends ORA = Ormat Technologies (geothermal) XOM = ExxonMobil CVX = Chevron BP = British Petroleum Bruce L. Cutright

Why Geothermal? Why Now? The Economics have changed geothermal is now cost-competitive with petroleum, and lower cost than solar and wind. The Resource Base has changed no longer only hydrothermal-magmatic but widely distributed geothermal heat flow The extractable resource is 2000 times the annual demand of the US. The regulations have, or will change Favoring non-CO2 emitting energy sources In Summary, Why Geothermal? Why Now? The technology has changed, radically revising the economics of geothermal energy’s use in the production of electrical energy. And, as a result, the resource definition has changed, completely revising the identified resource base from a geographically limited magmatically linked hydrothermal resource to a widely distributed and efficient conductive heat flow resource. Bruce L. Cutright

Sponsored Research Opportunities Geothermal Energy – Sponsored Opportunities The American Recovery and Reinvestment Act: $350 million new investment in this technology. Geothermal Demonstration Projects = $140 Million Enhanced Geothermal Systems Technology Research and Development = $80 Million Innovative Exploration Techniques = $100 Million. National Geothermal Data System, Resource Assessment, and Classification System = $30 Million Private funding opportunities for BEG, at this time, equal or exceed the federal or state opportunities. Sponsored Research Opportunities Government Funded opportunities equal to 350 million Immediate private funding opportunities exceeding 10 to 20 million Bruce L. Cutright

The Bureau’s Immediate Opportunities $11.6 Million over 3 years Technology Interface System, $3.6 Million over 2 years Towards Field Testing of CO2 as Operating Fluid for EGS, $4.9 Million over 2 years Geothermal Energy from Coproduced Fluids, $452,791 for 1 yr. (potential for $MM over 5 years) Geothermal Energy From Geopressured Resources $361,191 for 1 yr. (potential for $MM over 5 yr) Geothermal Data Development, Collection and Maintenance, $2.28 Million over 3 years he Bureau of Economic Geology’s existing outstanding proposals: Database assembly and management 2.28 million or 750,000 per year 1 million over the next year from private firms, with potential to continue this over 2 to 5 years. Heat mining fluids research, 5 million over next 3 to 5 years Bruce L. Cutright

The Bureau’s Long Range Opportunities Everything we have learned about petroleum reservoir characterization, development and production is applicable to Geopressured / Geothermal Development 3-D Geo-Model The Bureau of Economic Geology’s long term opportunities? Everything we have learned about petroleum reservoir characterization, development and production is applicable to Geopressured / Geothermal Development. Streamline Modeling of Fluid Allocation Factors Streamline Fluid Allocation Factors Source: BEG and I-Reservoir, Inc. Bruce L. Cutright

Where is the Cutting Edge? Primary Focus is on Geopressured Zones having Thermal-Kinetic-Chemical Energy Content Combining geothermal heat extraction using supercritical carbon dioxide Links geologic sequestration of CO2 with non-polluting, renewable energy production Results in improvement of heat extraction efficiency by 40% to 180% (Pruess, K. 2006) Provides a methodology for coal fired power plants to recover the energy penalty incurred in CO2 capture Metal – Organic heat carriers (MOHC) offer additional improvements in efficiency, at a cost. Bruce L. Cutright

Thank you Cooper Basin Bruce L. Cutright Flow tests at Cooper Basin EGS Site, Australia (Geodynamics, 2005) Bruce L. Cutright