A&D marketing for the oil and gas industry



Onshore / Renewable

Envoi has been mandated by TREDIC Corporation (a specialist infrastructure & real estate company), in partnership with a private geothermal developer to assist in the search for investors to participate in the development of an initial 35MW geothermal power project, the first of several planned in the Bavarian region of Southern Germany.

The region is already an established hotspot for several large deep geothermal energy installations due to the favourable geological conditions. Significantly, several municipalities, including that of Munich, have plans under way to significantly increase their geothermal energy usage for renewable heat and power. The positive political moves towards geothermal energy in Germany are clearly evidenced by the Renewable Energy Sources Act (‘EEG’) passed in 2016 that guarantees geothermal generated power is subsidised at €0.25 cents/kWh for 20 years on projects completed prior to 2021 (meaning investment is sought with immediate effect). Geothermal producers are also not subject to the auction process imposed upon other forms of renewable energy generation.

The TREDIC-led partnership is very experienced in geothermal drilling and production, both nationally and international, having been successfully involved in several other geothermal projects in the Alpine foreland Molasse Basin. Here, the fractured Late Jurassic carbonate aquifer target deepens southwards in the Alpine foreland to between 2,800 to 4,500 metres and typically provides water temperatures of between 110° to 140° C, with boreholes recording flow rates between 150 to 280 litres per second.

The Concession area is therefore estimated capable of generating some 10,000 MW of geothermal power, which in turn is sufficient to generate more than 500 Megawatts (MW) of electrical power, so more than enough to supply the proposed initial 35MW geothermal power station being planned. Of around 55 operating boreholes in this part of Bavaria, there have been no dry holes drilled, with 90% of the boreholes producing above the temperatures and flow rates needed.

Standard oil and gas drilling techniques are ideal to target, drill and complete the wells, which can be located using the existing 3D seismic survey over the area. Electricity would be generated using a hydrothermal power plant, which can be purchased as a turnkey build with manufacturer’s guarantees. Formal application for the mining licence and property lease would be followed by reprocessing and interpretation of the existing 3D seismic. This would be used to effectively locate the four production and three re-injection wells proposed. Local connection to existing infrastructure at two locations ensures immediate access to market, sales and cash flow. From a licence being granted, followed by drilling and power plant construction, first cash flow would be expected within two years. The water produced also meets the very high German standard for drinking water, so the project can also be used to supply aquaculture and other applications to generate additional revenues.

The maximum capital investment of the project is estimated to be €180 million, with a first drawdown requirement of €35 million, comprising €30 million for drilling and exploration, €5 million for set up plus €145 million for construction and build. The economics show this would generate consistent gross annual revenues of €49.5 million for 20 years with the subsidised tariffs. Depending on the structure of the investment up to a 60% interest in the project is being offered in return for funding the drilling where the construction phase funding is already secured. An investor is only required to show an initial €5 million of physical funds and proof of the remaining €30 million exploration drilling costs to satisfy the Bavarian authorities in order to issue the mining licence.