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Earth Heat Resources moves further on Copahue project with draft concept study

Cordillera, Cerca de Copahue, Argentina (source: flickr/ patricia_sgrignuoli, creative commons)
Alexander Richter 31 Jul 2011

Australian Earth Heat Resources (ASX: EHR) moves further in the development of the Copahue project in Argentina after receiving a draft Concept Study on initial exploitation of the geothermal resource from Sinclair Knight Merz (SKM).

In a release, Australian Earth Heat Resources (ASX: EHR) announces it “has ticked another box in the development of the Copahue project in Argentina after receiving a draft Concept Study on initial exploitation of the geothermal resource from Sinclair Knight Merz (SKM).

Importantly, the costs are within previous estimates and there are no environmental or technical impediments to the project proceeding.

The existence of four wells at the project has enormous benefits, including the ability to use the COP-4 well for production, potentially leading to early cash flows.

This means that the company may only need to drill one production and one injection well before generating cash flows. Earth Heat is the only ASX listed geothermal company with a potential Bankable Feasibility Study (BFS) in the pipeline, and therefore is a front runner in the sector to generate revenue.

During the quarter, SKM interpreted a significant resource upgrade at Copahue, with a 150% increase over historic resource estimates. This underpins the view that the resource at Copahue is of world class scale.

Earth Heat also signalled its intention to list on the Toronto Ventures Exchange to tap greater investor recognition for its international portfolio of assets.

The company is in a select group of developers worldwide as it continues to demonstrate progress at the Copahue project, where it is looking to develop geothermal 15 MW power plant.

Engineering firm SKM’s study supports Earth Heat’s current commercial and risk profiles for initial development of a small modular plant and involved conceptual design of the wellfield, steamfield, power plant and power export into the national electrical grid.

On July 7 an Environmental Impact Assessment (EIA) was completed separately as part of the process and was significant as it is instrumental in determining the presence of major issues and indicating mechanisms for minimising the impact of the proposed activities on the environment.

Torey Marshall, Earth Heat’s managing director, said “the receipt of the Concept Study is a significant milestone. The 15 MW modular design meets EHR’s current commercial and risk profiles for initial development, which importantly would exploit a known geothermal resource which has significant upward scalability.

“Thorough and rigorous environmental assessments are also being undertaken to ensure minimal environmental impact of future development plans.’’

The Concept Study has had a positive outcome and revealed significant social and environmental benefits with the best practice development possible based on the EIA.

Pre-existing drilling provides opportunities for minimising future production well risk, with only two production wells likely to provide requisite net 15 MWe power production with reserve for run-down.

The location in Neuquen Province provides for suitable sites for power plant construction within close proximity to the four existing wells.

An organic rankine cycle (binary) power plant with air cooled condensers provides an effective method for geothermal power conversion however final design will depend upon the outcome of further studies.

The 15 MWe net produced by the power plant can be readily exported to the national grid by way of existing 33kV line.

Should an integrity check of the existing COP 4 well prove positive it may be utilised as the second producing well.

The presence of 4 wells, some of which have previously been connected for the production of steam, significantly de-risks the project, by increasing the confidence of the resource.

The recommended option for the anticipated conditions is an air-cooled organic rankine cycle (binary) plant.

An ORC plant is expected to provide good conversion efficiency at a reasonable capital cost. Spent geothermal condensate would be re-injected, and non condensable gases (NCGs) vented to atmosphere.

First cost estimates are in line with global averages of $3 million to $6 million per MWe installed, but will be refined during subsequent studies.

Earth Heat is currently undergoing an internal review and consultation process with a view to determining the parameters of the next stage of the Copahue development.

The resource at Copahue provides significant scope for development at the project, with the potential energy generated for consumers in the Neuquen Province of Argentina.

The Copahue project is located 55 kilometres to the national electricity market interconnector, with a sealed bitumen road to the site from Neuquen City.

Other infrastructure includes power lines connected from the site to the nearby town of Caviahue, a plentiful water supply with oil field services and equipment in the Province.

Earth Heat has commenced the first phase in a Feasibility Study for the ‘fast track’ development of the plant at Copahue.

Earth Heat intends to use the Feasibility Study to secure financing needed to accelerate the plant to reach production and ultimately generate cash flow.”

Source: ProActive Investors