Objective

The objective of the RSM is to increase private sector investment in geothermal exploration drilling in Turkey.  This will be done by providing reimbursement of a percentage of the private investor’s exploratory drilling costs when a well is judged as unsuccessful based on preset conditions that are established in line with the developer’s business plan for the resource.

Funding for the RSM has been provided by a contingent grant from the Climate Technology Fund (CTF) to the Government of Turkey.  It is expected that a total of 38 million USD will be available for exploration drilling projects by the RSM. The implementing agency will be a dedicated unit (TKB RSM Unit) within the Development Bank of Turkey (TKB).

The goal is to be achieved by reducing the financial risk of exploration drilling projects in greenfield areas.  In this context, an exploration drilling project is defined as the drilling of one or more wells in a given geothermal reservoir in order to validate the viability of power production, and/or direct use application, at that site.

Beneficiaries can apply to participate in the RSM competitive bidding process. Once the Beneficiary is successfully enrolled in the program, 40% (for wells in Aydin, Denizli and Manisa [1] ) or 60% (for wells elsewhere) of the cost of failed wells will be reimbursed by the RSM to the Beneficiary up to a total of $4 million under a scheduled drilling program. A success fee, amounting to 10% of the estimated well cost, is paid upfront (or a bank guarantee is provided) by the Beneficiary to the RSM. When a completed well meets or exceeds the success criteria that has been set on a custom basis for the drilling program the success fee is retained by the RSM.  In the event of a failed well, the success fee is reimbursed to the Beneficiary.

A standard RSM program will consider drilling costs of three wells per project, but the program can be extended to a fourth and a fifth well at a lower coverage (40% of the investment costs in all cases) and higher success fee (25%). The exploration wells to be supported by the RSM can be production-size, medium size or slim wells, as dictated by the drilling program necessary to meet the requirements of the supporting business plan. Realistic success criteria will be based on geoscientific information and need to be consistent with the accompanying business plan. The success criteria will be subject to negotiations between the concession holder and the RSM during contract negotiations before drilling starts.

[1] We note here that since the province of Manisa has only been partially covered for geothermal explorations, projects in regions outside the already explored geothermal basin, will be considered to be covered by 60% for the first three wells in the drilling programme, as elsewhere in Turkey. The exact locations will be established later on.