Alaskan Naknek project considered economically viable

Fishing boats at Naknek, Alaska (source: flickr/ echoforsberg, creative commons)
Alexander Richter 14 Jun 2011

Alaskan utility Naknek Electric Association is facing good news in form of a positive report by geothermal service firm GeothermEx considers the project still economically viable despite earlier drilling issues.

Reported last week, the quest of Alaskan utility Naknek Electric Association is “finally generating some positive news.

GeothermEx, a subsidiary of oilfield services giant Schlumberger, has assessed Naknek Electric Association’s first well and concluded the utility is on its way toward a geothermal project that “can make economic sense.”

The GeothermEx memorandum was among papers NEA’s attorney filed June 2 in U.S. Bankruptcy Court in Anchorage.

The rural electric co-op, which serves the Bristol Bay area in Southwest Alaska, was forced to file for Chapter 11 protection from creditors in September 2010 due to cost overruns and other issues related to the geothermal drilling project.

The court papers indicate NEA still faces much work, and tens of millions of dollars in additional costs, to get a geothermal power plant up and running.  But the co-op sounds determined to take on additional debt and achieve an alternative to burning expensive diesel to generate power.

NEA “believes it is in the interest of its members and creditors that it continue to pursue” a $50 million loan guaranty from the U.S. Department of Agriculture’s Rural Utilities Service, NEA’s court filing said.

The loan would “permit the repayment of geothermal development debt and development of two additional wells and a geothermal power plant.”  The GeothermEx memo provides extensive detail on the troublesome drilling of NEA’s first exploratory geothermal well, known as G-1. The memo also presents “the justification for drilling well G-2.”

“Valuable lessons learned while drilling well G-1 will be used to drill well G-2,” the memo says.

NEA serves the villages of Naknek, South Naknek and King Salmon in Southwest Alaska. Like many electric utilities in bush Alaska, it must haul in diesel to run its generators.

The co-op purchased a drilling rig for its geothermal campaign, and drilled the G-1 well in 2009 and 2010 at a site about seven miles northeast of King Salmon.

The well was planned for 14,000 feet but full depth was never reached.

After problems including the loss of several drill bit cutting heads in the hole at 11,218 feet, drillers bored a sidetrack to 11,387 feet.

However, rock formations in the sidetrack were unstable and sloughing blocked the hole, causing the drill string to become stuck repeatedly. To keep the hole open, a heavy drilling mud laden with barite was used. Barite is a dense mineral commonly used as a weighting agent for drilling fluids, according to Schlumberger’s online oilfield glossary.

Despite this, the string ultimately got stuck and couldn’t be freed, and the bit and part of the bottomhole assembly were left in the hole. After attempts to retrieve the equipment failed, a “fish” was left below 10,480 feet, making this the effective total depth of the G-1 well. The decision to use the barite-rich drilling mud was unfortunate as it clogged the fractures, reducing permeability in the production interval, the GeothermEx memo says.

NEA was forced to bring in additional equipment to air-lift the well in an effort to clean out the barite. Despite the drilling problems, the G-1 well showed hopeful signs. The well can produce geothermal fluid at a temperature of 190 degrees, and possibly as high as 235 degrees.

At the lower temperature, the well has the potential to provide a net generation of about 325 kilowatts from each 1,000 gallons per minute of fluid produced, the GeothermEx memo says. At 230 degrees, the potential is about 550 kilowatts. While a temperature of 230 degrees is “relatively modest compared to other geothermal developments worldwide,”

NEA’s geothermal project “can make economic sense” considering the avoided cost of generating power with diesel fuel, the memo says. NEA’s second geothermal well is expected to go deeper, to 12,000 feet, and seek a higher temperature zone than that found in the G-1 well, the GeothermEx memo says.

“Having learned valuable lessons while drilling its first geothermal well with its own drilling rig, NEA is well positioned to drill well G?2,” the memo says. “The conductor casing has already been installed at the G?2 well site, and many of the elements required for this well are already on site, including the rig, nearly all of the drilling ‘tangibles’ (wellhead, casing, etc.) and most of the cement needed to complete the well. NEA has developed a 92-day drilling program, with the well costing an estimated $10 million.”

A “likely outcome” for NEA’s project is “a pilot development consisting of a geothermal well doublet, with G-2 as the production well and G-1 as the injection well.” But whether further drilling and construction of a geothermal power plant will proceed remains an open question, judging from the June 2 bankruptcy filing. Much apparently hinges on NEA receiving word by fall of whether the loan guaranty will be granted.”

Source: Petroleum News