What Target to Drill? Geothermal Pre-Drill Play Evaluation (PDPE): Understanding the Nexus Between Project Risk and Value

Abstract

Geothermal exploration and development in Australia is rapidly evolving and many companies will soon be at a critical juncture of deciding which targets to drill and likely well locations. Although the global petroleum sector has evolved a detailed system of prospect evaluation and risking, the same level of discipline has not yet been formalised in the geothermal sector, where play evaluation decisions are largely focused on cost, rather than value and risk. Geothermal systems in Australia can be characterised by four aspects of geological risk (Pg) - heat flow, thermal resistance, reservoir and water. These risks can be condensed, on further modelling, to temperature risk (Pt) and flow rate risk (Pw). When combined with perceived drilling, engineering and other risks (Pe), these factors form the basis of a simple risk-based evaluation system that can be applied to geothermal plays anywhere in the world. Combining cash flow considerations allows for the estimation of Net Present Value (NPV) for each play. The product of risk and NPV (the Expected Monetary Value, EMV) provides a more robust and considered assessment of the relative