News
Sep 24, 2008Geothermal Reporting Code
Article from IGA Newsletter July-September 2008 (GA News No. 73)
Australia develops world’s first geothermal reporting code
The development in Australia of the world’s first uniform code for assessing geothermal energy resources could generate a wave of investment in the sector. With this more rigorous and consistent standard applied to reporting Reserves and Resources, investors will be more confident and those projects that are more worthy will find it easier to attract financial support.
The Australian Geothermal Resources and Reserves Reporting Code was unveiled in August at the AGEG Annual Conference in Melbourne.
The Code is a response to the recent trend for the financing of geothermal development companies through stock market listings. Whilst this presents a welcome market-driven mechanism for funding the exploration and development of geothermal prospects, informed decisions about investment are difficult to make given the long development path from exploration to power generation. In particular it is difficult for investors to have confidence in the claims made by developers about the energy resources and reserves available within each project.
Although geothermal energy extraction and electricity generation is a mature industry, to date there has not been a universal or even widely agreed code for reserves and resources reporting. Given the current and future intense interest surrounding renewable energy forms, a standardized and trusted approach to geothermal energy resources and reserves classification and estimation was long overdue.
A unique aspect of the Code is that it has been designed to apply both to “conventional” magmatic-related high temperature geothermal resource developments, lower temperature hot aquifers, and Hot Rock systems.
The rapid pace of development of Australia’s geothermal industry is perhaps not widely appreciated. Since the grant of the first Geothermal Exploration License (GEL) in Australia in 2001 through year-end 2007, 33 companies have joined the hunt for renewable and emissions-free geothermal energy resources in 277 license application areas covering ~19,000 km2 in Australia. The associated work programs correspond to an estimated investment of AUS$851 million over the period 2002-2012.
Because many of the companies active in the Australian geothermal industry have a strong mining background, developing a standard based around mineral reserves was deemed the most suitable approach. The simplicity and wide acceptance of the reporting code that is most commonly used for reporting of mineral reserves and resources (the Joint Ore Reserve Committee’s “JORC” Code) made it a natural choice for the basis of the new geothermal code.
The resulting Australian Geothermal Resources and Reserves Reporting Code covers a minimum, mandatory set of requirements for public reporting of estimates. While it tabulates a large number of issues to be considered in reporting, it is not particularly prescriptive as to methodology.
A key distinction that the Code makes is that ‘Reserves’ are deemed to be energy that is considered to be commercially recoverable now. ‘Resources’, on the other hand, require further work to be classified as Reserves. Confusion between these two classifications can be the root of confusion for investors, especially when there is intense marketing going on to raise funding. The code relies upon a two dimensional classification taking into account levels of geological knowledge and confidence and Modifying Factors which directly affect the likelihood of commercial delivery.
The Code is accompanied by a ‘Geothermal Lexicon’ that provides guidance on how resources and reserves can be estimated for reporting purposes. The techniques described in the Lexicon are not a mandatory part of the code. However, any significant deviations from the Lexicon should be disclosed and explained when reporting under the Geothermal Code. Example reports are under preparation.
At the time of writing the first edition of the Code and Lexicon had been extensively reviewed and agreed within AGEG, with a formal launch in mid-August. The Australian Geothermal Energy Association (AGEA) has resolved that use of the Code will be mandatory for Public Reports by its members, which include all of the significant geothermal companies in Australia. The draft Code and Lexicon were submitted to the International Geothermal Association (IGA), which has recognized the Code as appropriate and endorsed the Lexicon. The International Energy Agency has also received a submission.
Preliminary discussions have been held with the Australian Securities Exchange (ASX), and copies of the Code and Lexicon have been submitted to the Toronto Stock Exchange and the Ontario Securities Commission.
Future hopes
It is hoped that once the Code becomes accepted by the investment community in Australia it will become the basis for a more uniform international approach to the issues. In an open letter to AGEG, the President of the International Geothermal Association, Dr Ladislaus Rybach said: “… we commend you on the effort that has been put in and the rigour of the approach taken.” The Chairman of IGA’s Ad Hoc Committee on Reserves and Resources, Jim Lawless of SKM, says that this more rigorous approach could assist the geothermal industry around the world. “The Code gives investors the chance to measure different schemes and brings some consistency to the business.”
“There have often been differing opinions in the past about what to measure and how to measure it,” says Mr. Lawless. “By standardizing reporting of Reserves and making it mandatory to define what is actually commercially recoverable now, the Code will facilitate investment and inspire more confidence in geothermal schemes.”
For copies of the Code and Lexicon, contact:
Mr. Tony Hill
Principle Geologist
Petroleum and Geothermal Group
Primary Industry and Resources SA
GPO Box 1671
Adelaide SA 5001
Email: .(JavaScript must be enabled to view this email address)
