IADB: low fuel prices as opportunity for geothermal
Low oil prices could be an opportunity for geothermal development in the region of Latin America and the Caribbean, as it could lower prices for drilling activities and free up drilling capacity for geothermal development.
In a recent blog post by Sandro Bruni of the Inter-American Development Bank (IADB), the low oil price is described as having both negative and positive impacts. For geothermal eneryg, so the piece, the low oil price is seen as an opportunity.
“Many countries [of the region]—with support from the IDB—are working to develop new geothermal plants, to make this technology a reality for the region. We have seen more and more activity, whether direct (exploration or project construction) or indirect (policies conducive to investment). The drop in the price of crude oil in the last few months could boost these efforts. It’s a simple question of supply and demand.
The geothermal industry and the oil industry use all the same drilling services, which can amount to as much as 50% of a project’s total budget.
(the above cost table is from the World Bank/ ESMAP Geothermal Handbook)
“When the price per barrel is high, the oil industry reinvests part of its profits in exploring new fields, so the costs of drilling services tend to increase due to high demand. This upward pressure on prices affects geothermal projects as well.
The reverse occurs when the price per barrel drops: The oil industry focuses on exploiting its reserves instead of exploring new areas. Drilling services and equipment become more widely available, opening up an opportunity to contract them at lower prices.
In this case, a setback for the oil industry means an advantage for geothermal. In other words, this is geothermal’s time. Now it is up to governments to encourage investment, and up to business to seize this opportunity.”
Source: Blog of IADB