News

Denmark: compensation guarantee scheme for geothermal drilling

Drilling rig on site for Thisted-5 well in Denmark (source: WellPerform)
Alexander Richter 7 Dec 2017

In 2015, Denmark introduced a Compensation Guarantee for Geothermal Projects, for drilling risk, damages and reservoir risk, with details recently shared by Danish company WellPerform.

On its website, Danish project management, well engineering and consultancy firm WellPerform, recently provided details on the “Danish Compensation Guarantee for Geothermal Projects”.

“Development of a geothermal well is a costly ordeal, and combined with the apparent risk of a low payback or even abandonment of the hole, the investors and stakeholders are left understandably precautious.

To encourage the pursuit of geothermal energy sources, a compensation guarantee has been put in effect per 2015 for projects in Denmark.

The compensation guarantee comprises a user charge, correlating to a percentage of the budget: 13.5% for the first well, and 9% for each following well. In return, the insurance policy covers three guarantees in total:

  • Drill Risk Guarantee: coverage of budget overruns while drilling.
  • Total Damage Guarantee: partial coverage of drilling costs, provided the project must be abandoned due to technical problems.
  • Reservoir Risk Guarantee: partial coverage of drilling costs, provided that the reservoir does not perform as expected.

The implemented legislation on the Danish Compensation Guarantee – available on www.retsinformation.dk – was based on a document compiled by WellPerform for Energistyrelsen that may be acquired here.

Under the Risk and Total Damage Guarantee, for budget overruns between 15% and 40% of the approved budget, the Danish Compensation Guarantee may cover 80% of the budget overrun. Between 40% and 65%, 40% of the budget overrun may be covered. If the well fails or the budget overruns >100%, 75% of the budget overrun may be covered.

We recently shared details on best practices guidelines, which are expected to soon be released in English by WellPerform.

For more information on the Danish Compensation Guarantee and best practices of geothermal projects, the company provides this contact details: Rasmus Lystbæk Petersen at rlp@wellperform.com.

The actual piece by WellPerform provides also further details on the Drilling Risk Guarantee etc., see link below.

Source: WellPerform