Announced earlier this year, Development of Turkey (TKB) has now initiated the first phase in its new Geothermal Risk Sharing Mechanism (RSM) for Turkey.
The objective of the RSM is to increase private sector investment in geothermal exploration drilling in Turkey by providing partial coverage of exploration wells’ drilling costs in case of unsuccessful wells. Funding of the RSM will be provided by a contingent grant from the Climate Technology Fund (CTF) to the Government of Turkey. It is expected that a total of USD 38 million will be available for exploration drilling projects by the RSM. The implementing agency will be a dedicated unit (RSM Unit) within the Development Bank of Turkey (TKB).
The goal is to be achieved by reducing the financial risk of exploration drilling projects in greenfield areas. In this context, an exploration drilling project is defined as the drilling of one or more wells in a given geothermal reservoir in order to validate the viability of power production, and/or direct use application, at that site.
Beneficiaries can apply to participate in the RSM. Once the Beneficiary is successfully enrolled in the program, 40% (for wells in Aydin, Denizli and Manisa) or 60% (for wells elsewhere) of the cost of failed wells will be covered and paid by the RSM to the Beneficiary up to a total of $4 million under a scheduled drilling program. A success fee, amounting to 10% of the estimated well cost, is paid upfront (or a bank guarantee is provided) by the Beneficiary to the RSM. When a completed well meets or exceeds the success criteria that has been set on a custom basis for the drilling program the success fee is retained by the RSM, but otherwise it is reimbursed to the Beneficiary.
A standard RSM program will consider drilling costs of three wells per project but the program can be extended to a fourth and a fifth well at a lower coverage (40% in all cases) and higher success fee (25%). The exploration wells to be supported by the RSM can be production-size, medium size or slim wells, as dictated by the drilling program necessary to meet the requirements of the supporting business plan. Realistic success criteria will be based on geoscientific information and need to be consistent with the accompanying business plan. The success criteria will be subject to negotiations between the concession holder and the RSM during contract negotiations before drilling starts.
Call for Expression of Interest
The RSM Unit within the Development Bank of Turkey (TKB) is now asking for a simple expression of interest from potential Beneficiaries in participating in the RSM for exploratory drilling. The expression of interest only needs to state the name and contact person of the company and the potential area in question.
More detailed description on data requests will be provided at the application workshop, but eligible Beneficiaries need to fulfill in general the following qualification criteria:
- Hold a valid exploration license.
- Having finished surface exploration, including geological-, geophysical- and geochemical exploration.
- If wells are already available, provide the information from the wells.
- Having constructed initial Conceptual Model (simple or extensive)
- Having selected drilling targets and well design.
- Having created a business model.
As environmentally sustainable geothermal utilization is one of the key objective of future geothermal development, CO2 emission of successful projects need to be below 583 g/kWh, unless acceptable mitigation measures are suggested.