Work on new projects in the Northeast of Iceland planned to start this year
Drilling rig on site at Theistareykir, Iceland (source: Iceland Drilling)
Alexander Richter
11 Sep 2012
Icelandic Landsvirkjun is planning to start work on two new geothermal power projects at Bjarnarflag and Theistareykir in the Northeast of Iceland. Iceland Drilling successfully participated in a tender for the drilling of up to three initial wells for the projects.
In news last week on a recent tender for the drilling of two to three geothermal wells for research purposes in Iceland, there are details emerging about the planned development by Landsvirkjun, the Icelandic National Power Company.
The way it looks now, work on the project could start before the year end, despite that there is no expectation to reach a final agreement on the expected power purchase until the spring of 2013.
Last week, Landsvirkjun opened the only offer it received for the tender of drilling of geothermal wells at the Bjarnarflag geothermal project in the Northeast of Iceland.
Landsvirkjun is planning to build two geothermal power plants at Bjarnarflag and Theistareykir to serve the energy demand of planned heavy industry in the municipality of Húsavík. The tender was for the drilling of up to three geothermal wells. The company had expected at least two offers, but only one was received by the deadline and this by Iceland Drilling (Jardboranir). The offer by Iceland Drilling was below the expected cost of the wells, or at about 74% of the cost estimates by Landsvirkjun.
Landsvirkjun was satisfied with the result of the tender, as it was below the expected and budgeted cost.
Iceland Drilling is though not dissatisfied with the difference in expected cost and the given offer. “Iceland Drilling is excited to see these projects now starting and to participate in the further development that is expected in this region (of Iceland)”, so the CEO of Iceland Drilling, Agust Torfi Hauksson.
There are still uncertainties about when construction will actually start, despite the now closed tender for the drilling at Theistareykir. The power purchase agreement with the German company PCC, that is planning to build a silica plant at Bakka, contains certain pre-conditions that will not be solved until in May next year.
The power purchase agreement requires Landsvirkjun to start delivering power by the end of 2015. The development and construction of a power plant is though expected to be three years. Therefore the company needs to work on the project despite this uncertainty about the preconditions of the PPA. Landsvirkjun would then expect to start a tender for the power plant equipment within the next few months.
The CEO of Iceland Drilling was asked if this represents a breakthrough for the company after the Icelandic economic collapse and he said: “This might be the case – if true. This is (though) not a large auction, given these are only two to three wells to drill. So we cannot start celebrating yet. But certainly these are steps in the right direction and we welcome the opportunity to work on interesting projects on our home turf.”
Nearly all operations of Iceland Drilling moved out of Iceland about three years ago and nearly all revenues are generated outside of Iceland.
The company’s largest project with two drilling rigs is in New Zealand and employs 60 people, or nearly a majority of all employees of the company. The company also is involved in large projects in Denmark and in the Caribbean, for example in Dominica.
The company has also been with projects in the Azore Islands for the last three years. The project there ended in August this year and the drilling rig will now be mobilized to be used in Iceland and is expected in the next few days. For Iceland Drilling the Icelandic home market is important.
Source: Visir, Vidskiptabladid (both in Icelandic)
