Panax, Bakrie Power sign E. Java geothermal project deal

Australian-listed firm Panax Geothermal Limited announced Wednesday the signing of a binding heads of agreement (HoA) with PT Bakrie Power to develop a 165 megawatt Ngebel geothermal project in East Java.

Bakrie Power was awarded the tender for the project in November 2010, with a designated development capacity of three 55 megawatt geothermal power plants. There is potential to expand the project to over 200 megawatts, the company said.

Under the deal, Panax will earn a 35 percent working interest in the project through funding of required exploration works before commercial development commences, whereupon the parties will contribute pro rata to development costs.

?Panax is committed to building a strong geothermal business in Indonesia and this signing represents our fourth project in Indonesia. Panax?s combined share of potential generating capacity from the four projects exceeds 160 megawatts, with significant upside potential beyond that.? Panax Managing Director Kerry Parker said.

?The Ngebel project has enormous potential. It is a near-term development project in a strategic location that is underpinned by a guaranteed, commercially attractive power tariff.?

?This agreement will also significantly strengthen Panax?s relationship with one of its major development partners, being the third geothermal project in Indonesia that Panax will develop alongside Bakrie Power,? he said.

A considerable amount of exploration has already been undertaken in the project area, including a number of temperature gradient wells, along with detailed geological mapping, geochemistry works for water and gas, thermal manifestation chemistry, heat flow modelling, heat flow mapping and geothermometry work.

Panax will be project operator during the exploration and feasibility stages and will also fund the acquisition of extensive existing data and reports on the project. This will include surface development planning, geological studies, geophysical studies, magnetotelluric data and a detailed, as well as an externally prepared feasibility study.

The Ngebel Geothermal project is intended to supply geothermal energy to Indonesian state-owned power company PT PLN (Persero). The reservoir temperature is predicted at up to 200?C and is approximately 1,000 metres deep.

Commercial development of the project is expected to commence late 2012, it said. (romel)