Status of Geothermal Licence Activity

Since the grant of the first Geothermal Exploration Licence (GEL) in Australia in 2001 to the end of June 2009, 48 companies have applied for 384 licence application areas covering ~358,906 km2 in Australia.

Most (272, or 71%) of these geothermal licence areas are located in South Australia.

Over A$1.5 billion in work program investment is forecast for the period 2002–13. Approximately A$325 million of this forecast was invested in the term 2002–08; 97% of which was spent in South Australia. This current forecast (for the term 2002–13) represents an increase of A$235 million over the forecast stated for year-end 2006. These forecasts exclude capital expenditure associated with demonstration power plants assumed in the Energy Supply Association of Australia's scenario for 6.8% (~5.5 GWe) of Australia's baseload power sourced from geothermal resources by 2030.

This progress follows encouraging geothermal drilling, temperature logging and flow testing programs in South Australia, the dissemination of information that publicises the vast potential for Australia's geothermal resources, and the implementation of legislation to clarify investment frameworks to explore for and sell geothermal energy in a number of Australian jurisdictions.

An online and up to date map showing licence areas in Australia has been developed by Hot Dry Rocks and can be accessed through their website by following this link to geothermal licence areas map. (external site)

The map below shows the geothermal licences, applications and gazettal areas as at February 2009 (top map). The bottom map (courtesy of Prame Chopra at the Australian National University) shows extrapolated temerature at 5km interpolated across Australia. The map is based on available (in places sparse) data that may not be a true reflection of geothermal gradients on a regional basis. Research by the Australian National University discusses the data distribution in more detail.

Top: geothermal licences, applications and gazettal areas Dec 2006; Bottom Extrapolated temperature at 5km across Australia

The activities of the 48 Australian geothermal explorers and 21 service providers at year-end 2008 are summarised in the attachment Geothermal Company Status.

A summary of exploration and proof-of-concept projects that have reached the drilling phase by year-end 2008 is given below. The five projects operated by four companies that have already entered the drilling phase are all located in South Australia and include: Geodynamics Limited’s Habanero project; Petratherm’s Paralana and Callabonna projects; Green Rock Energy’s Blanche Project; and Panax Geothermal's (Scopenergy) project in the southeast of South Australia.

GEODYNAMICS
The most significant advancement in terms of demonstrating the potential of Hot Fractured Rock energy is Geodynamics’ 'Proof of Concept' project near Innamincka in the Cooper Basin in northeast South Australia. Geodynamics has drilled five wells: Habanero 1 (4,421m), Habanero 2 (4,357), Habanero 3 (4,221m), Jolokia 1 (4,911m) and Savina 1 (3,700m). Jolokia 1 is located 9.2 km WNW of Habanero 1, beyond the extent of the fracture network drilled with habanero 1, 2 and 3, as defined during seismic monitoring during the stimulation of Habanero 1 and 2. Savina 1 is located a further 10 km to the west of Jolokia 1.

Flow of geothermally heated formation waters at a maximum rate of 25 litres/second to surface at (up to) 210ºC from Habanero 2 was achieved during flow testing in 2005. The geothermal reservoir is a water-saturated, naturally fractured basement granite (250ºC at 4,300 metres as reported by the Operator) with permeability that was effectively enhanced with fracture stimulation. Two fractured reservoir zones are present in the Habanero wells: an upper less permeable zone at 4200m; and a lower more permeable zone below 4,300m.

Habanero 3 has an 8 ½ inch open hole section over target reservoirs (compared to 6 inch for Habanero 2). Habanero 3 has sustained production of 208°C formation water at a rate of 18 kg/second and flowing pressures of 27.5 MPa (3,990 psi) through a 12.5mm fixed choke. Flow testing of Habanero 1 (the injection well) and 3 (production well) continued in late 2008 through early 2009 followed by chemical tracer injection between the two wells.

The horizontal extension of stimulated reservoirs at the Cooper Basin site lends itself to multi-well developments. Geodynamics’ HOTROCK 50 project entails a 9-well, 50 MWe power station. The 9 wells include 4 injection wells and 5 production wells up to 1 km apart. This will be an important milestone for the demonstration of EGS from Hot Fractured Rock in Australia and a stepping stone towards commercialising vast renewable and emissions-free baseload geothermal energy supplies to meet Australia’s future energy requirements. Geodynamics believes that a successful test between Habanero 1 and 3 will lead to large-scale development of an area of more than 1000 km2 where rock temperatures, stress conditions and rock properties are extensive and favourable for geothermal energy production.

PETRATHERM
Petratherm has drilled two wells to establish thermal gradients down to about 600 metres above exceptionally high heat producing granites in South Australia. Results from both wells were encouraging, with the Callabonna and Paralana sites respectively exhibiting 68 and 81°C/ km thermal gradients. In June 2006, the phase-2 drilling program at Paralana was successfully completed with the geothermal test well being extended to 1,807 metres. Temperature logging of the well suggests a world class thermal resource is located at Paralana, with extrapolations indicating 200°C can be expected at a depth of 3.6 km above basement granites, within insulating strata susceptible to fracture stimulation. Petratherm refers to this play concept as heat exchange within insulator (HEWI).

Petratherm will commence drilling the Parlana 2 well to approximately 4,000m in June 2009. Stimuation, flow testing and the drilling of a second well will follow, pending results of the first deep Parlana well. The company then plans to create an underground HEWI system with the circulation of water between the two Paralana project wells to demonstrate 'hot rock' energy production from an initial small scale power plant to supply up to 7.5 MW to a growing electricity market 10 km away at the Beverley Uranium Mine. This plan is the subject of a Memorandum of Understanding between Petratherm and the owners of the Beverley Mine, Heathgate Resources.

In November 2008 Petratherm was awarded a geothermal exploration permit (GEP) in Victoria's East Gippsland Basin to develop a Hot Sedimentary Aquifer (HSA) geothermal project.

GREEN ROCK ENERGY
Green Rock drilled Blanche No 1 to 1,935 metres (718 metres of sediments and 1,216 metres of homogenous hot granite) 8 km from the giant Olympic Dam mine in South Australia in 2005. The target granite is interpreted to persist to depths of 6000 metres over an area of about 400 km2 and represents a potential geothermal resource in excess of 1000 MWe. Cores and wireline logs from Blanche No 1 suggested natural fractures exist. In 2008, Green Rock undertook a mini-fracture stimulation program in Blanche 1 to inform the design of a deep well stimulation. Thirteen zones were tested and the well bore was imaged with a slim-hole acoustic televiewer to enable the analysis of fractures, post fracture stimulation. Green Rock is now planning to drill a deep well in 2010.

PANAX GEOTHERMAL (SCOPENERGY)
In the first quarter of 2006, Scopenergy drilled 3 slim-hole wells near Millicent and Beachport in southeast South Australia to determine geothermal gradients and confirm several large scale heat flow anomalies previously measured in 19 petroleum exploration wells and 26 water wells in the vicinity of its tenements.

In mid 2006 the company completed temperature logging of its 3 wells: Heatflow 1A, 3A and 4. Poor recovery of core samples from unconsolidated sediments and highly variable lithology affected the reliability of thermal conductivity measurements and hence, estimates of heat flow.

Scopenergy was acquired by Uranoz (an ASX-listed company that changed its name to Panax) in October 2007. In December 2008, the company merged with Osiris Energy Ltd who operated GEL 223 that covers the Penola Trough in the Otway Basin. Scopenergy drilled 3 slim-hole wells in its Limestone Coast Project located near Millicent and Beachport in southeast South Australia to determine geothermal gradients and confirm several large scale heat flow anomalies previously measured in 19 petroleum exploration wells and 26 water wells in the vicinity of its tenements. Panax Geothermal plans to drill Salamander 1 to a depth of approximately 4000m in late 2009.

GEOTHERMAL RESOURCES LTD
Geothermal Resources Ltd is exploring a gravity low that could be a high heat producing granite associated with HR reservoirs predicted to be over 200°C at roughly 4,000m depth in its Frome project area in South Australia. Potential HR power markets for the Frome project are electricity consumers connected to the National Electricity Grid, some 120 kms away at the township of Broken Hill. A number of active minerals exploration projects that lie between the Frome Project and Broken Hill are additional, potential future power markets.

Frome 2, 3A, 5 and 9 were each drilled to depths of approximately 500m in 2007. Geothermal Resources drilled 3 wells in 2008 (Frome 5A, 10 and 11), providing encouragement to locate and drill Frome 12 which was completed in February 2009, to a depth of 1,761m. Samples of the granite from this well are reported as having 'well developed sub horizontal fracturing'.

Geothermal Resources plans to drill at least two additional holes to roughly 1,800m in the Frome area during the first half of 2009. These wells will be tied to existing seismic data to select a deep well location.

TORRENS ENERGY
Torrens Energy drilled 6 wells in its Parachilna Project in South Australia in late 2007 to early 2008. The work led to the definition of the Parachilna Play Statement of Inferred Resources in mid 2008, the first such resource to be defined under the new Australian Geothermal Resources and Reserves Reporting Code. In 2008-2009, Torrens Energy drilled a further 8 wells in its Port Augusta, Adelaide Plains and Lake Torrens Projects.

Up to 20 additional heat flow wells are planned for 2009 and 2010. The aim of this program is to delineate heat flow trends as a precedent to locating deep proof-of-concept wells in proximity to the NEM and power markets.

AGL Energy Limited (AGL) acquired a 9.99% share in Torrens Energy Limited and entered into an agreement to earn 50% in any geothermal resource project identified by Torrens Energy in return for funding the drilling of a well in 2008.

EDEN ENERGY
Eden Energy drilled Chowilla 1 to 512m in the Renmark-Tararra Trough, in the Riverland of South Australia, 40 km northeast of Renmark. Chowilla 1 was located to establish geothermal resources in proximity to transmission lines running to Adelaide and Broken Hill.

KUTh ENERGY LTD
KUThEnergy holds geothermal tenements covering 14, 171 km2 in eastern Tasmania. Between October 2007 and December 2008, KUTh undertook a systematic (~20km x 20km), shallow (up to 300m each) 36 well drilling program over its tenements in eastern Tasmania to establish heatflow in the region. KUTh has found high heat flow granites (up to 159m W/m2 in boreholes), and a sedimentary pile above the granites averaging 3-5 km in its Tasmanian licences. This shallow drilling program is a precursor to locating deep drilling locations.

GREENEARTH ENERGY LIMITED
Greenearth Energy is one of a few companies now exploring for both petroleum and geothermal resources under separate but coincident licences. So far, Greenearth has obtained valuable geothermal information for an HSA play from three of its petroleum wells in petroleum permits coincident with its goethermal licences in the state of Victoria.

These include Hazelwood 1 (2,081m total depth), Boola Boola 2 (1,715m) and Alberton 1 (998m). Greenearth is seeking support for a 10.7 MW (scalable to 48 MW) HSA project in GEP10, near Geelong in the State of Victoria.

INFERUS RESOURCES (SOUTHERN GOLD LTD)
Inferus is a wholly owned subisdiary of Southern Gold. Inferus holds tenements located west of South Australia's Lake Torrens, between Olympic Dam and Port Augusta in South Australia. Inferus measured prospective heat flows (>100m W/m2) in minerals holes drilled to 1 km, and next plans to conduct geophysical surveys and shallow drilling in its South Australian Geothermal Exploration Licences.

HOT ROCK LIMITED
Hot Rock holds 5 Geothermal Exploration Permits covering 27,000 km2 in the Otway Basin in the state of Victoria. Prospective water temperatures have been measured in petroleum wells in HRL's Otway Basin GEPs, including: 143°C in Windemere 2 at 3,595m in GEP 7; and 142°C in Ross Creek 1 at 3,659m in GEP 8. Hot Rock's interpretation of pre-existing well data, reflection seismic data and results from a magneto-telluric survey completed in 2008 have defined drilling locations northwest of Koroit in GEP 8. Hot Rock Limited has estimated its GEP 8 Koroit project has power generation potential of some 200 MWe. Hot Rock Limited also holds an Exploration Permit (EPG 19) in Queensland covering an area of 657 km2.