The Australian Code for Geothermal Reserves and Resources Reporting: Practical Experience

Jim Lawless, Malcolm Ward, Graeme Beardsmore, Fiona Holgate

Background and Status*

• In Australia AGEG and AGEA have taken a lead role in defining a code for reporting of geothermal resources and reserves, which was launched in 2008

• Useful discussions have been held with Joint Ore Reserve Committee (JORC), who govern the Australian minerals industry, and ASX– It is expected that it will be adopted by ASX in 2010

• AGEA have resolved that the Code will be mandatory for their members – Which means all the leading geothermal companies

• The Code has gained acceptance and is being used including outside Australia • The first 18 months of public reports have been completed under the Code

and reviewed by the Compliance Committee• The second edition of the Code is expected to be released early 2010

* These items already covered in companion paper (Williams et al )

Parallel Activities*• IGA: established committee, agreed to support Code and put on website

• CANGEA have now released their own code very closely based on the Australian example, expected to be ratified by the TSX

• NZGA are supportive, want to apply agreed methodology to new national assessment

• USGS have just done new national inventory.

Scope* • Includes “conventional” and EGS projects • Both high and low temperatures• Applies to projects in other countries carried out by Australian companies• Existing projects as well as green-fields

– Need to allow for energy already extracted

• Focus on electricity generation, but methodology readily adaptable to direct use

Key Principles*• Transparency:

– The basis for the estimate should be clear

• Materiality:– All relevant issues disclosed

• Competency:– Relies on the professional judgement of an accountable “competent person”, who

would often be independent from the project proponent

Reporting vs. Guidelines• Definition is at two levels

1. Guidelines for methodology: a comprehensive outline of preferred methodology and default parameters, not mandatory, set out in Lexicon

2. Reporting requirements (the Code): much shorter document, has minimum mandatory requirements

• Considerable scope left for individual judgement in how guidelines are applied

“Competent Persons”*Should be:

– Affiliated to an appropriate professional organisation• A register is being established for the 2nd Ed.

• Membership includes an agreement to conform to the Code of Ethics

– Qualified and experienced • Minimum criteria defined

• Must describe their background

– Preferably independent, but if not declare any interests– Accountable

• A complaints procedure is being established for the 2nd Ed.

– Need to sign off on all public reports where resources are referred to

Special Features of Geothermal• Potential for recharge on a human time scale in some resources• Fluids can be mobile across concession boundaries• Energy prices are site specific and very variable

– Prices available for electricity form geothermal sources currently range from ~ 3 to 35 USc/kWh

• This affects:– The economic drilling depth and hence the reservoir volume

– The cut off grade

– The plant type that is affordable and hence the efficiency

• Technology is rapidly changing– Lower temperature projects becoming more feasible which greatly extends the

resource base

How: Preferred Approach• Draw on SPE and other sources for principles and guidelines

– (Lexicon)

• Draw on JORC for implementation and reporting – (Code)

• Allow a range of estimation methodologies• But require a certain level of definition of the methodology/assumptions in

each case– Relate cut-off “grade” to a specific assumed power price and/or technology

Two Dimensional Categorisation• “Geological” knowledge and confidence

– The resource characteristics

– How reliably they are defined

– Typically : “Proven – Probable – Possible”

• Commercial extractability– What can be commercially extracted - now

– What may be extracted under more favourable conditions

– Typically:

• Reserve -commercial

• Resource - as yet sub-commercial, but reasonable prospects for eventual extraction

Classification

Increasing geological knowledge and

confidence

Exploration Results

Geothermal Resources Geothermal Reserves

Inferred

Indicated

Measured

Probable

Proven

Consideration of energy recovery and conversion, economic, marketing, environmental social, legal, and regulatory factors

(the “Modifying Factors”)

Certainty Classifications: Resources*• Measured

– Sampled by wells– Deliverability demonstrated– Area defined by geophysics / temperature gradient mapping

• Indicated– Sampled by wells– Temperature indicated by geochemistry or nearby wells– Area defined by geophysics / temperature gradient mapping

• Inferred– Less direct indications of area, depth and character– Sound reason for indicating resource e.g. geochemistry

• Exploration Results– Can be less formally reported but will not define resources– Still need a Competent Person statement

* Items changed in 2nd Edition

Certainty Classifications: Reserves*• Proven

– Sampled by wells– Deliverability demonstrated– Area interpolated between wells – “No surprises” expected in future drilling– “Bankable Projects” need a feasibility study and PPA as well as proven reserves

• Probable– Sampled by wells– Temperature indicated by geochemistry or nearby wells– Area defined by geophysics / temperature gradient mapping

* Items changed in 2nd Edition

Units for reporting: 1st Edition• Exploration Results

– Must not include any definitive assessment of the quantum of contained or recoverable energy

• Resources– Should be reported as energy in place (PJ)*– For higher certainty categories, can optionally report recoverable and/or converted

energy (e.g. MW-years or GWh)*– To do so the technology pathway must be defined

• Reserves– Should be reported as energy in place (PJ)*– Should also report recoverable and/or converted energy– To do so the technology pathway and development plan must be defined

* Items changed in 2nd Edition

Commercial Extractability: Resources• Could be commercially extractable in foreseeable future

– Note SPE says “within 5 years”

• Technology identified, not yet necessarily economically or technically proven

• Define temperature limits below which deliverability would become un-commercial – – the extraction Cut Off and/or Base Temperature

– NOT necessarily the same as the plant Rejection Temperature or ambient temperature

Commercial Extractability: Reserves• Commercially Extractable in the context of a Stated Target Type of

Development• Use Well Deliverability as a practical measure• Define areas / volumes that are extractable• Define temperature limits below which deliverability would become un-

commercial

Other Methodology Considerations • Accommodating recharge• Non-energy constraints

– Environmental– Regulatory– Access– Chemistry

• Recovery factors• Efficiency of energy conversion / utilisation• Project lifetime/ sustainability

Practical Experience – On-going Issues• What level of detail ?

– Tension between producing verifiable estimates and being too technical for investors

– Solution: produce short Public Report- refer to comprehensive background reports

• Some lack of compliance in omitting Competent Person statement– Solution: having an active compliance subcommittee

• Confusion between Cut Off and Base Temperature, and lack of consideration of technology pathway and economics in deciding upon them– Solution: requires more explicit treatment in the 2nd Ed

Practical Experience – Issues (2)• There is a large difference (up to 50x ?) between energy in place and

recoverable energy, and recovery factors are often not well constrained– This can lead to very large estimates of energy in place for inferred resources, which

can be misleading or lead to a lack of credibility– Solution: in 2nd Ed, the resource is defined in terms of recoverable energy, not energy

in place. This is a major change, and future Reports are going to have to state which edition of the Code is being used.

– The Lexicon is being revised to provide default recovery factors for various geological settings

Practical Experience – Issues (3)• Quoting energy in place not very meaningful for existing projects with

proven recharge and production history – Dynamic modelling preferable in those cases– Need to recognise that the eventual failure mode is not necessarily heat depletion, it

could be due :• Pressure decline• Cool water ingress• Fluid depletion• Adverse chemistry• Environmental impacts(see companion paper by Clotworthy, Lawless and Ussher)

Conclusions• The Australian Code is a good step towards a formal definition of

geothermal Reserves and Resources• It is uniquely suitable for reporting on both “conventional” and

“unconventional” geothermal projects• It is already starting to serve as a basis for international standardisation• Experience gained in the first 18 months of operation is being applied to a

revised 2nd Edition• The Code, Lexicon, Practice Notes and example reports for various types of

projects can be downloaded from:http://www.pir.sa.gov.au/geothermal/ageg/geothermal_reporting_code

(update in progress)