Panax updates Indonesia geothermal projects
Wednesday, July 27 2011 - 08:23 AM WIB
Panax Position in Indonesia
Over the past 18 months, Panax has been able to secure a strong foothold in Indonesia, through our Alliance Agreement with PT Bakrie Power, and through our participation in four advanced geothermal development projects in Indonesia:
| Project | Location | Status | Panax Interest | Gross megawatts | Approximate net megawatts to Panax |
| Sokoria | Flores | Near term development | 45% | 30 | 15 |
| Dairi Prima | Northern Sumatra | Near term development | 15% | 30 | 15 |
| Ngebel | Java | Near term development | 35% | 165 | 60 |
| Jambi | Central Sumatra | Advanced Exploration | 95% | 80 | ? |
| TOTAL | ? | ? | ? | 305 | 165 |
We are looking to further develop our position in the Indonesian geothermal sector, given the likely lower development risk, higher economic return, and shorter timeline to develop nature of the geothermal prospects in Indonesia.
This is characterised by:
? Targeting conventional volcanic geothermal reservoirs ? ?tried and tested technology?;
? Much shallower resource ? significantly reduced risk, shorter drilling times and significantly cheaper development costs;
? Significantly higher temperatures, and megawatt output per well; and
? Attractive feed in tariff regime ? providing pricing certainty.
The following table provides an overview of power generation and costs for Indonesian geothermal projects in comparison to Australian geothermal projects, and underscores the reasoning behind our strategy of securing and developing our portfolio of near-term development projects in Indonesia:
| Well Parameter | Typical Australian Geothermal Project | Typical Indonesian Geothermal Project |
| Typical well depth | 4,000 to 4,500 metres, or more | Approximately 2,000 metres |
| Typical temperature | 170?C to 200?C | 240?C or more |
| Typical cost (US$) | $12 million to $14 million | Approximately $5 million |
| Typical output per well | Up to 5 megawatts per well | ? |
Project economics
Detailed in-house pre-feasibility modelling has been completed on all of our Indonesian geothermal projects.
Total costs of generation are estimated to be approximately US$57 per megawatt hour, inclusive of capital and operating costs and costs of finance, and based on average estimated production rates of 5 megawatts per production well.
The following table provides an overview of total cost per megawatt hour of electricity produced based on varying megawatt output per production well.
| Output per production well | Total cost of production/megawatt (US$) |
| 4.0 | 64 |
| 5.0 | 57 |
| 6.0 | 52 |
| 7.0 | 48 |
SOKORIA
Geothermal Project
Location: |
Flores, Indonesia |
| Panax interest: | 45% |
| Operator: | Panax Geothermal |
| Joint Venture Partner: | PT Bakrie Power |
| Project Status: | Near Term Development |
Likely Temperature |
240 degrees Celcius |
| Likely Depth | < 2,000 metres |
| Estimated Output per Well | 7 megawatts |
| Licence Area | Awarded in 2010 |
| Resource Estimate | 90?110 megawatts (JICA, Japan) |
| Estimated Cost per megawatt hour | US$52 |
| Power Purchase Agreement in Place? | Yes, with PT PLN (Persero) |
| Power Purchase Price | US$125 per megawatt hour, indexed to CPI, plus CDM?S |
| Development Plan and Schedule | Prepared and underway |
This advanced geothermal project has an extensive data base, including three exploration wells as well as an extensive magneto-telluric survey (?MT?) covering the target area, as well as hot spring geochemistry.
Our activities and achievements during the quarter included:
? Finalisation of all interpretative work on the various historical studies and surveys completed to date, including a reinterpretation of the available MT data and of the available hot spring geochemistry data;
? Finalisation of the selection of the sites for the initial appraisal and production wells;
? Finalisation of negotiations for correcting minor anomalies in the contract area boundary, which have now been satisfactorily completed;
? Progress to finalising the final executed Power Purchase Agreement with PLN; and
? Completion of a detailed geochemical sampling program. The aim of the program was to finalise all required geoscience works prior to drilling operations.
Gas samples are being analysed in Indonesia and water samples are being analysed in New Zealand.
Panax was assisted with the survey by personnel from Department of Mines and Energy, Ende Regency (Flores, Indonesia) and people from Sokoria, Roga and Toba villages.
Following the grant of final environmental and development permits for the project, development of the project will commence shortly. There do not appear to be any issues relating to the grant of the final and required environmental and development permits;
A detailed project implementation and development plan for this project is close to completion.
NGEBEL
Geothermal Project
Location: ??????? |
East Java, Indonesia |
| Panax interest: | Panax earning into a 35% |
| Operator: | Panax Geothermal |
| Joint Venture Partner: | PT Bakrie Power |
| Project Status: | Near Term Development |
Likely Temperature ????? ??????????? ??????????????????????? |
240 degrees Celcius |
| Likely Depth | <2,000 metres |
| Estimated Output per Well | 7 megawatts |
| Licence Area | Awarded in 2010 |
| Resource Estimate | 220 megawatt (JICA, Japan) |
| Estimated Cost per megawatt | US$52 |
| Power Purchase Agreement in Place? | Yes, with PT PLN (Persero) |
| Power Purchase Price | US$90 per megawatt hour, including CDM?S |
| Development Plan and Schedule | Prepared and underway |
The major highlight of the quarter under review was the Signing of Heads of Agreement with PT Bakrie Power to jointly develop the 165 megawatt Ngebel Geothermal Project in East Java, Indonesia. 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. There is potential to expand the project to over 200 megawatts.
Panax will earn a 35 per cent working interest in the project through funding of required exploration works before commercial development commences, whereupon Panax and Bakrie will contribute pro-rata to development costs.
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 information will assist in the ongoing development of the project and is anticipated to result in significant savings in both time and money.
During our recent reconnaissance visit to the site, we had the opportunity to meet various members of the local government and local community and village in the areas surrounding the Ngebel geothermal project area.
The project has very strong government and community support, with a strong desire to see the project development activities to be underway and for geothermal production to commence.
Commercial development of the project is expected to commence late 2012.
DAIRI PRIMA
Geothermal Project
Location: ??????? |
Northern Sumatra, Indonesia |
| Panax interest: | 51% |
| Operator: | Panax Geothermal |
| Joint Venture Partner: | PT Bakrie Power |
| Project Status: | Near Term Development |
Likely Temperature ????? ??????????? ??????????????????????? |
240 degrees Celcius |
| Likely Depth | <2,000 metres |
| Estimated Output per Well | 7 megawatts |
| Licence Area | Area Discussions being finalised between Panax/Bakrie and others for access to the licence areas ? under a conventional/standard ?farmin? style arrangement |
| Resource Estimate | 60 megawatt (Panax internal) |
| Estimated Cost per megawatt | US$52 |
| Power Purchase Agreement in Place? | Binding Terms Sheet Agreement between Panax/Bakrie and PT Dairi Prima Minerals ? under a direct power purchase agreement with the mine developer and operator |
| Power Purchase Price | US$150 per megawatt hour for first 8 years, and US$125 per megawatt hour thereafter, indexed to CPI, plus 50 per cent of CDM?s |
| Development Plan and Schedule | Prepared and underway |
Panax and Bakrie have agreed a ?Binding Terms Sheet Agreement? with PT Dairi Prima Minerals (?PTDPM?), a subsidiary of the listed Bumi Resources Group, for the supply of up to 25 megawatts of geothermal power for PTDPM?s underground Dairi Prima lead/zinc mine that is to be constructed in northern Sumatra.
During the quarter, Panax has made quite solid and continuing progress including, but not limited to:
? Advancing discussions with the current tenement holder for the Sibayak and neighboring geothermal licence areas, for rights of access to and usage by Panax and Bakrie of these geothermal fields ? this is expected to be finalized shortly;
? Advancing our discussions with the current plant operator at Sibayak, regarding a joint development of the spare capacity of the Sibayak geothermal reserves for supplying power to PTDPM?s underground mine site;
? Detailed meetings in Jakarta between Panax and PTDPM, relating to development requirements, timings, schedules, and power plant design and associated requirements; and
? Progress towards formalizing the Binding Terms Sheet Agreement into a formal and executed Power Purchase Agreement between the parties.
A detailed project implementation and development plan for this project is close to completion.
JAMBI
Geothermal Project
Location: |
Central Sumatra, Indonesia |
| Panax interest: | 95% |
| Project Status: | Earlier Stage Exploration |
In March 2011, Panax announced the signing of a Memorandum of Understanding (?MOU?) with government-owned power company PT Petrogas Jambi Power (?Jambi Power?).
Jambi Power has strong support from the Jambi Province?s local government with regard to the development of geothermal energy in the area, and has an extensive database of information on the relevant geothermal targets. Under the terms of the MOU, Panax holds an initial 95 per cent interest in the project areas. Panax and its partner intend to expedite the securing of required licences and permits to explore and develop potential geothermal resources with a target of up to 80 megawatts per project.
During the quarter we concentrated our efforts on attempting to secure the granting of the required licenses for exploration and development of the area to commence. (end of excerpt)