Maximizing exploitation of domestic primary energy resources and securing sufficient, reliable and affordable energy to a growing economy in an environmentally sustainable manner has been, and remains, the Turkish government’s core energy policy priority.
Besides the enhanced regulatory framework by the Turkish government over the last decade, exploration activities conducted by the Mineral Research and Exploration General Directorate (MTA) have been a critical driver behind geothermal development in Turkey. MTA was until 2007 responsible for the exploration and mapping of geothermal resources in Turkey and has traditionally been the main institution advancing the development of geothermal utilization. Out of a total of 190 geothermal sites discovered, MTA prioritized 25 sites which were considered suitable for electricity production. At the end of February 2018, geothermal generation capacity in the country had reached a total of 1,064 MW. All current installations are located in the Aydin, Denizli and Manisa provinces. Most of these sites were initially explored by MTA after which the resource risk was largely mitigated with additional drilling. As of 2007, MTA no longer has the required resources or the mandate to undertake extensive geothermal exploration drilling. Moreover, 72% of 1,799 active geothermal exploration licenses have been issued to the private sector with no substantial increase in exploration activities. The significant slowdown in new geothermal exploration activities is primarily due to the high risk of exploration drilling being shifted from the MTA onto the private investor. This situation is further compounded when commercial debt is generally not available to the private investor until the geothermal resource has been validated through exploratory drilling.
The objective of the RSM
The RSM aims to facilitate private sector investment in geothermal exploration projects in Turkey. The program consists of a mechanism through which the developer’s exploratory drilling cost is substantially reduced in the event of an exploratory drilling failure.
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 some districts in Aydin, Denizli and Manisa, see light blue colored districts in the graph below) 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.