THE G9 GEOTHERMAL ENERGY INVESTMENT PROGRAMME

UNDERSTANDING GEOTHERMAL ENERGY

Geothermal Energy uses the earth’s natural heat for any application that can be powered by heat, including electricity generation, district heating and cooling and desalination.  It is a clean, renewable resource that provides proven and commercially viable base-load energy (24/7) around the world for a number of these diverse applications.  Most other renewable energy sources, such as solar and wind, are not base-lo ad and require large areas which can have adverse environmental and social impact consequences. It is an energy source that is, in principle, available everywhere thus opening up the potential for viable energy applications in remote and island based location.

 

A geothermal project contains two major components: the upstream component consisting of a series of deep wells drilled encased into the earth and the downstream consisting of the surface engineering heat, electricity or desalination generating equipment.  Strada Drilling is unique in its ability to drill holes, or geothermal wells, faster and cheaper than its competitors by using patented technology, thus enhancing the overall economics of the whole project, whatever the downstream application may be. 

 

There are two main types of geothermal energy, each associated with a clear classification of geological conditions.  

 

Firstly ‘high enthalpy’, which uses high temperature rock such as that associated with volcanic regions typically found along the “Ring of Fire” around the Pacific Rim and the “East African Rift” (the volcanic market).  These regions include countries such as Indonesia, the Philippines, New Zealand, the West Coast of the US and Chile as well as Ethiopia and Kenya as examples.  This involves drilling geothermal wells thereby releasing energy in the form of steam and hot brine.

 

Secondly ‘low enthalpy’ which involves drilling into hard-rock or locations where the geothermal gradient (the rate at which the ground gets hotter with depth) is low, typically between 2-4 degrees Celsius per 100 meters of vertical depth.  The geothermal energy is extracted by pumping existing ground water and/or additional water into an injection well that flows back to surface up a production well after being naturally heated by the ground.  The increase in temperature provides sufficient energy to power installations, to produce electricity, district heating and desalinating. 

UNDERSTANDING THE GEOTHERMAL MARKET

The global demand for cost effective renewable energy is increasing.  Geothermal is already a multi-billion dollar industry in the global energy mix and is predicted to at least double over the next 15 years.

 

The Word Bank estimates that as many as 40 countries could meet a large proportion of their electricity demand through geothermal power.  It is currently estimated that only 6% of the world’s known geothermal resources are accessed.  

 

In addition, the International Energy Agency (IEA) has provided the following estimates with respect to global energy requirements:

 

  • By 2050, geothermal electricity generation could reach 1,400 TWh per year, i.e. around 3.5% of global electricity production, avoiding almost 800 million tonnes (Mt) of CO2 emissions per year.  This is equivalent of -3,2000 50MW projects.

  • Geothermal heat could contribute 5.8 EJ (1,600 TWh thermal energy) annually by 2050, i.e. 3.9% of projected final energy for heat.  This is the equivalent of ~3,650 50MW projects.

  • By 2050, more than half of the projected increase comes from exploitation of ubiquitous available hot rock resources, mainly via Enhanced Geothermal Systems (EGS).  Substantially higher research, development and demonstration (RD&D) resources are needed in the next decades to ensure EGS becomes commercially viable by 2030, and

  • Important R&D priorities for geothermal energy include accelerating resource assessment, development of more competitive drilling technology and improving EGS technology as well as managing health, safety and environmental (HSE) concepts

THE GEOTHERMAL ELECTRICITY MARKET

The global population is expected to grow from 7 billion today to 9.5 billion by 2050 with growth focussed in cities of today’s emerging markets.  Urbanisation of a population requires a rise out of energy poverty and, as such, total global energy demand could rise by 70-100% by 2050 from its level today.

 

The following key factors have driven the renewables energy sector, which has grown solar and wind to a US$1 billion industry in a short time:

 

  • 82% of energy production to date involves the burning of fossil fuels which is linked to a number of possible causes of global warming 

  • Governments and NGOs are pushing to reduce dependency on fossil fuels to curb the CO2 emissions trajectory with the goal of reducing temperature rises, warming oceans, shrinking ice sheets, rising sea levels, ocean acidification and extreme weather events.

  • There are global targets to reduce the use of fossil fuels but meet increasing energy demands and geothermal energy is an undeniably attractive solution.

  • The global market is approximately 13.3 GW of operating capacity as of January 2016, spread across 24 countries.  The US being the largest followed by the Philippines, Iceland, Indonesia and New Zealand.  Indonesia has the largest potential (40% of the world’s total potential).

  • Based on current data, the global geothermal industry is expected to reach approximately 18.4 GW by 2021.

  • Overall, if all countries follow through on their geothermal power development goals and targets, the global market could reach 32 GW by the early 2030’s.

  • 5.9 GW additional energy, assuming 4MW per well, results in 1,475 new wells being drilled.

 

The geothermal industry has identified over 100 large (>50MW) geothermal projects that are financially attractive using standard industry technology.  With the “Strada Approach” to drilling, using exclusive patented technology, this list of projects is expected to multiply significantly, with increasing emphasis on low enthalpy deep hard rock drilling.

THE GEOTHERMAL DISTRICT HEATING MARKET

The district heating market is an important opportunity for Strada because this market typically requires deep drilling in hard rock, allowing Strada to capitalise on a major competitive advantage.  Modern district heating systems can significantly contribute to the achievement of European Union Energy Policy objectives, which stand for the efficient use of energy and allow for large-scale integration of renewables as substitution of fossil fuels, in addition to ensuring security of energy supply.

 

Geothermal district heating technology remains underdeveloped despite the significant potential.  However, a number of projects have been launched, including those focused on developing geothermal district heating systems in Eastern and Central Europe(Bulgaria, Czech Republic, Hungary, Poland, Romania and Slovenia) and in other countries with ambitious 2020 targets, including the Netherlands, Germany, Denmark, Finland, the United Kingdom, Ireland, Italy and France

 

 

In Europe, over 5,000 district heating systems were installed in 2014 and the market share of geothermal district heat accounted for 10% of the heating market.  However, as detailed in several National Renewable Energy Action Plans for 2020 (NREAPs), the geothermal deep heat potential is much larger.

THE STRADA GROUP

Patented technology unlocking the economics of Geothermal Energy

 

Strada specialises in providing fully integrated contract drilling solutions for both the volcanic and deep hard rock (low enthalpy) geothermal markets.  Strada has an exclusive operating license on patented drilling technologies from Strada Design Limited, which unlocks the deep hard-rock geothermal market as an added sustainable alternative.  The highly motivated executive team at Strada has over 120 years of combined geothermal, drilling and natural resources experience.

 

The world’s current volcanic geothermal wells are typically drilled from surface to depths of between 1,500 and 3,500 meters and the deepest granite well previously achieved was drilled to only 2,600 meters. Strada can deliver wells significantly faster and cheaper than competing drilling contractors in this market.  Furthermore, the competitive advantage of Strada’s Fluid Hammer Operating System (FHOS) and drill rig designs enable wells deeper than 7,000 meters in very hard geology to be delivered at a fraction of the cost and time compared to the very best of conventional rotary technology.  In addition, with Strada Drilling’s compact rigs with small footprints, those previously inaccessible sites, whether in urban or difficult volcanic areas, can now be opened up for geothermal project development.  This is due to the patented innovations that fundamentally improve efficiency, safety and speed of drilling, resulting in lower costs for customers and high operating margins for the business.  This same technology can provide other advantages in the shallower volcanic market through methodologies that minimise potential reservoir damage. 

 

In the volcanic geothermal electricity markets, this technology enables Strada Drilling to drill under balanced (pressure delivered from drilling fluid or air that is lower than geological pressure) thus reducing the potential for damage to the permeable rock formations important to productive hot steam and brine reservoirs. 

 

This results in expected savings in the order of 80% in cost in drilling a typically deep well (± 5,000m) in hard granite conditions such as those found in Europe and North America.  This in itself, will unlock previously uneconomical opportunities right across the geothermal spectrum.

Competitive Advantage

 

Strada Drilling can consistently deliver deep wells faster and cheaper than competing drilling contractors providing capital cost savings to the market of up to 80% in hard ground (>200mPa).  This means in deep hard rock, Enhanced Geothermal systems wells have typically cost well in excess of £10,000 per meter.  Strada Drilling can drill, case and cement this ground at £2,000 per meter.

 

The Time Depth Curve (TDC) shown below is the actual drilling performance from the deep wells drilled in Finland in 2016, shown against the best previous TDC using conventional mud rotary drilling methods.  This clearly shows the significantly less time, and hence cost, to drill deep wells in hard-rock utilising Strada Drilling’s technology and methodology. 

 

Strada Drilling’s rigs are significantly smaller, more mobile, more powerful, faster to operate, faster to move, faster to set up, require much smaller drill sites and are cheaper to mobilise compared to competitor services.  Moreover, they are able to drill to the same depths as platform rigs without the time and cost that the platform rigs take to mobilise, set up or demobilise.  They offer a hugely reduced environmental footprint, drilling to the same depths using less consumables and as little as 15% of the fuel cost, coupled with 50% of the crew requirements, of traditional rigs.

THE G9 GEOTHERMAL ENERGY INVESTMENT PROGRAMME

PROJECT FINANCE:

With over 8000 District Heating programmes in Northern Europe that are primed for conversion from Coal, Oil and Gas to Geothermal Energy, the G9 has launched a Funding Programme to provide the financing for this 10 year project.

Although the scaling up of capacity and project management is an immense task, the beauty of the programme is that the features of each conversion are almost identical.

  • One of the largest Environmental Impact Projects in the world today

  • Building out Geothermal Energy Projects primarily in Northern Europe

  • Replacing existing Coal, Oil and Gas fired District Heating Plant with totally reliable Green Energy

  • Opportunities for Heat, Power and Cooling systems

  • Projects financed by the G9ICC – typically €30m per 30MW project

  • One ICC cell with up to 15 investors per project

  • Up to 60% debt financing available for each project

  • Project returns guaranteed by 20+ year PPA’s 

  • Development Phase IRRs 20%+

  • Long term income yield typically 12-15% per annum

  • Minimum Investment €1m

PHASE 1: Year 1-3 Up to 30 Projects

PHASE 2: Year 3-6 Up to 1000 Projects

PHASE 3: Year 6 et seq 1000 projects per annum

 

RIG FINANCE

Each €30m Drilling Rig can complete up to 3 Projects per annum. As the programme accelerates, the RIG supplier, HerrenKnecht AG can scale up production to up to 100 Rigs per annum. The G9 ICC is providing the financing infrastructure to fund the acquisition of each rig. 

Investors seeking long term annuity income with strong asset backed security are invited to make contact with G9

 
 
 
 
 
 
 

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