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GRC Transactions, Vol. 34, 2010

Doing Geothermal Exploration Business in Chile, Energía Andina Experience

Jose Soffia and Jorge Clavero Energia Andina S.A. www.energiandina.cl

Keywords were considered “Fuentes Probables” (Probable Sources: Hauser, Chile, Geothermal Law, Energia Andina, El Tatio, Apacheta, 1997) on which the granting process must be made through a Pampa Lirima, Tinguiririca, Puchuldiza bidding process. Since then, several preliminary exploration surveys in areas where the thermal manifestations were reported or are likely to Abstract occur, have been analyzed by few companies that were formed for this purpose, following the promulgation of the Geothermal The exploration activities for locating geothermal resources in Law in the same year 2000. This national inventory of geothermal Chile have expanded significantly in the past five years, in light resources has contributed to identify more than 20 prospect areas of the electricity shortage supply due to lack of natural gas and (Figure 2) with encouraging geothermal characteristics. Some rising producing cost. Recent efforts by the National Electricity of them are in an advanced exploration stage and others are still Commission (CNE) and State policies encouraging renewable waiting to be explored. energy development, will likely install geothermal development on our lands in the future, helping to diversify the electricity sources. Under the Geothermal concession Law and Non Conven- tional Renewable Energy (ERNC) Law, plus the fact that 10% of electricity generation should come from ERNC by 2024 and the possibility of recovering part of drilling costs in case of failure in exploration projects, with no doubt will ensure the geothermal development in Chile. In this scenario, Energia Andina, a private Chilean company established in Chile in 2008, is developing its business in several exploration concessions, most of them located in central and Energia Andina northern Chile. Through this paper we will comment technical Figure 1. Tectonic setting of Chilean Volcanic Activity. and non-technical issues to have in mind in order to be successful in managing and completing the exploration activities, at least in the formal process required by the Chilean legislation of getting Chile’s political framework is stable, with government and licenses and the approval of local people and authorities. non government people interested in expanding the renewable energy sources as a way to diversify the electric energy grid and Introduction reduce dependence on fossil and foreign fuels like LNG, Coal and Diesel. Chile holds a large amount of untapped geothermal energy Hydropower is currently the predominant mode (50% to 70%) resources, as a consequence of having a long active volcanic of electricity production in the central and south part of the country, chain related to plate subduction between the Pacific Plate and the and thermal generation (mainly coal and LNG, and some diesel South American Plate (Figure 1). Before the year 2000, several generation) is almost the only way of generation in the north of studies were carried out mainly by government related institu- Chile. Volatile prices and the dependence of high import costs of tions and private companies. The Chilean Geological Survey fossil fuels are making base load power production very costly. published a list of geothermal seeps and thermal zones in Chile Using today’s geothermal technology, Chile has an interesting (Sernageomin, 2000), counting in total 120 manifestations that potential to generate electricity by using geothermal resources.

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Tacora ticularly because the new Ministry of Energy is pushing in the Colpitas XV Polloquere 1, 2 right direction. Licancura 1,2,3 I Puchuldiza Sur 1-‐Sur 2 The law establishes the existence of exploration and exploi- Pampa Lirima 1, 2, 3 y 4 Irruputuncu tation concessions, which are granted by the new Ministry of Olca Aucan 1,2 San Pablo Energy. Exploration concessions are valid for two years and may Apacheta Paniri y Sta. Caterina 2 Ml TaNo-‐La Torta be extended for an additional two years. This condition applies if the concessionary proves to have completed at least 25% of the II Alitar Tuyajto 1,2,3,4 work and budget committed for the concession. Six month prior to the end of the first exploration period the concessionary has to

Juncalito 1 y 2 submit the application for the extension. Laguna Verde After these two or four years of exploration, the concessionary III has a maximum of two years to conclude the evaluation of the technical information collected and produce the feasibility report, justifying the intent to develop the geothermal field through a

IV power plant; this means it has in total six years to evaluate an area. To do so, the concessionary must apply for an Exploitation Concession during that period of time. Exploration and Exploita- tion concessions give the exclusive right to own all the geothermal -an.ag/ Colimapu Galo Calerías power and brines, to use the land and to transfer or sell its geo- VI Tinguiririca A y B Necul thermal rights without any limitation, given that processes have Calabozo Pellado been followed and the work has been accomplished. L. Maule Sta. Sonia During the first years of the Geothermal Law, concessionaries Chillán Sta. Antonia Concessions proposed only surface exploration work that included geology, Huiscapi Granted geochemistry and geophysics, with budget ranging US$ 200,000 IX San Gregorio Sollipulli In process to US$ 500,000 leaving for the second period of concession the In bidding contes drilling of gradient holes or larger size geothermal wells. The competition for land rights registered in the last three years has June 2010 forced the concessionaries to increase their work commitment proposals in the first concession period, reaching values from Figure 2. Main prospect areas.(April,2010). US$ 1 million to the challenge amounts of about US$22 millions, adding more geoscientist activities and incorporating gradient Preliminary assessment of the geothermal potential of the holes and even bigger size geothermal wells in the first two years country based on calculations made by U. de Chile’s , Dr. Alfredo of exploration permit. (Lahsen, 1986; Lahsen et al, 2005) have indicated that Chile’s This condition is accelerating the evaluation of some prospec- geothermal electricity potential generation is about 16.000 MW, tive areas, but also is pushing the management staff to high risk for 50 years, contained in fluids with a temperature over 150°C, limits, considering that it is necessary to get several permits for and at a depth less than 3,000m, but more conservative figures access and environmental assessment studies, especially if an area managed by the industry put that number in the order of 3.350 of interest is located in indigenous lands, in the high Andes with MW, considering the possible development of the more known no roads and heavy winter snow fall, or inside restricted envi- actual prospects, in a time frame of 20 years based on actual ronmental areas. Also, it is important to consider that geothermal technology. business in Chile is brand new and experienced drilling services are not always available when needed. Work Setting for Exploration The fact that some concessionaries are taking this risk approach of drilling during the first period, should force them to Since January 2000, Chile has a Geothermal Law (Nº 19.657) obtain permits prior to obtaining concession permits, as a way that is the legal background to support geothermal business in to avoid operational risk, but without guaranties. But this situa- exploration and exploitation concessions. It is a new Law that is tion is not happening. in revision to improve certain aspects that should make it more attractive to private investors and also, to give more confidence avoiding speculation. But this is not enough since other regulations that apply to geothermal business need a better definition and better implementation. When we wrote this paper in April of this year, there was a bottle neck in the Ministry of Energy in regards to the number of concessions requested by several companies that are in line, waiting for a resolution to handle the resources that the Ministry currently manages. To this date this has not been possible. We hope this will be solved by the time we present this paper, par- Figure 3. Period of Geothermal Concession in Chile.

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Practically, a concessionary has only 1 ½ years to perform the (2) Re-discovering one that has already been explored— even minimum work commitment (≥25%) to obtain the rights to have drilled—in the past, but that was dropped in the fiscal cli- in total four years to evaluate technically a geothermal conces- mate of time. In Chile there are only 3 of these prospects: sion (Figure 3). El Tatio, Puchuldiza and Chillan. (3) Finding new geothermal resource Technical Considerations in Exploration As Chile has not developed commercially geothermal projects The first goal for developing geothermal energy is obtaining in the past, Energia Andina is strongly focused on the last approach a resource that is both sufficiently hot and flows at a rate that which typically requires exploration activities that involves de- would make production economical. These resources are typically tailed geological, geochemical, geophysical and drilling studies. obtained by one of three principal approaches: Due to that, Energia Andina is developing grass-roots ex- (1) Purchasing one that is already developed or under devel- ploration efforts applying known and new ideas, concepts and opment, which is not the case in Chile; or purchasing a technology of where geothermal reservoirs form, according to company that already has projects, which is something that the particular geological setting of the geothermal prospects in will happen in the future. Chile. Although each exploration project is different and carries its own set of unique features, the basic approach of exploration is Grass-root exploration the same everywhere. Our volcanologic expertise in Chile combined with the many years of geology work in mining and hydrocarbon exploration Identification prospect areas and prioritization activities of our team, is helping to prioritize prospects and also identify blind areas where active geothermal system may occur. Energia Andina has physically reviewed more than 30 prospect Initiate areas during the last year, and plans to continue doing it to improve Participate in Request negotiation Bidding contest Concessions Land access its priority portfolio. permit Once an area is granted to Energia Andina, or is in process to be granted, a combined set of studies are carried out, including: If concession If concession aeromagnetic, ground gravimetric, three component short period granted granted natural seismicity, seismic tomography, MT and TDEM survey, geology, and geochemistry of surface geothermal spring water and gases (Figure 4). All of the above are contributing to the con- Initiate negotiation Initiate struction of consistent geothermal models, which in general are Land access permit Environmental Permits for surface exploration justifying the perforation of gradient holes, as a way to improve information, lowering the risk of discover hot fluids and altered Initiate rock, gaining confidence about the active geothermal system Environmental Permits for surface exploration model for each particular prospect area. If everything is successful as it is already, Energia Andina will proceed to test the targets with at least two expensive geothermal Initiate Exploration Work with boots on the ground. exploration wells (starting with 26” or 30” at well head) in each Geology, geochemistry and geophysics prospect during the second period of exploration concession during year 2011 and 2012.

If results are positive Non Technical Issues in Exploration In order to execute the exploration work program proposed for Initiate Environmental Permits the concession, in general it is necessary to obtain, first the land for drilling activities, if required owners permits to access the area followed by an environmental assessment analysis. If it is in Indigenous lands, these permits can Drill Core-gradient holes be hard to obtain, if they are not well organized, involving many +/- 1,000 meter depth lawyer hours to identify them, and negotiate access agreement. This is a key point to manage well, in which case involves hiring If results are good field people and anthropologist and sociologist to handle positive the conversations. Depending on what king of land the concession or the area falls, different environmental regulations apply. (Law Nº 19.300). Drill two Geothermal Well +/- 1,500 meter depth In various regions of Chile, however, there are substantial environmental permitting hurdles to clear, even for mere surface Figure 4. Exploration process in Chile. exploration, and these hurdles impose extra costs and time delays,

639 Soffia and Clavero

that in some cases put in risk the chance of getting the extension of the exploration concession period. Surface geothermal exploration often is done without environmental impact assessment (EIA), but in cases where the interest zones are in restricted areas (natural park, natural wildlife reserves, RENCA ALTO near wetlands or glaciers etc.), it is required to ask the environmen- JAHUEL tal authority if in their opinion the activities planned require to be RANCAHUA evaluated. This can take weeks or even months to get an answer. If it is required to enter the to the EIA, the timeframe to get a resolution can take 6 months or up to 2 years in some cases. ITAHUE In central and southern Chile, most of the high enthalpy geothermal prospects are located in the high Andes hills, at elevations between 2,000 to 3,500 meters, where more than half of the year it ANCOA is covered by snow, complicating the operation, in rugged terrains and steep mountains. Operators must consider building roads to work all year around as soon as geoscientific data indicate good information. Usually, the first gradient holes are planned using helicopter CHARRUA transported coring drilling rigs, increasing cost to dangerous limits, avoiding the construction of roads. Currently, four projects have used this method: Chillan, Calabozo, Tolhuaca and Laguna del Maule, and soon Energia Andina will do the same in Tinguiririca project, (Figure 5). TEMUCO

500 Kv

220 Kv

154 Kv VALDIVIA 110 kv

66 Kv

Hydro Power Station

Thermal Power Station

Transmission Station

Mine Operation

Geothermal Concessions Mineral Figure 6. Central Interconnected System.Belt SIC.

Figure 5. View of Tinguiririca project, Central Chile.

Economically, many of these prospects will face the challenge of being developed in mountain terrains, at an average of 80 to 100 km distance to the main electric grid, known as Central Intercon- nected System, SIC. They will have to consider building their own power line, crossing mountains which are forest below ±1,500 m.a.s.l., unless they pass close to existing power lines, which is very unlikely or some projects will be favor due they are located close to hydro power project been in construction or planning. In northern Chile, the situation is completely different. Op- erators can work all year around, but they have to consider that all high enthalpy prospects are located at high altitude, @ 4,000 meters, and in some regions they will have to experience “Puna effects” (low of oxygen in the air). Several prospects are being evaluated: El Tatio, Apacheta, Pampa Lirima, Polloquere, Pu- chuldiza and Irruputunco, and many other will soon come up if the concessions are granted, (Figure 6). Figure 7. Altiplanic view. Polloquere Project, Arica-Parinacota region.

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Compared with southern prospects, in the north of Chile they 345 Kv

220 Kv are located even further away, averaging 120 km to the main power

110 Kv grid, but in desert conditions. In this case, the chance to sell elec-

66 Kv tricity directly to mining consumers exists, these are located in a Hydro Power Station mineral belt along more than 1,000 km from Arica to Antofagasta Thermal Power Station cities (see map at Figure 8) at mid-range distance between the Transmission Station main power grid and the geothermal prospective areas. Mine Operation Our experience in working with both southern and northern Geothermal Concessions projects is extremely positive. Having a well schedule plan, all the work can be done in the timeframe of the actual concession rules. If not, delay may occur. We have to acknowledge that there is no place for mistakes.

Acknowledgements To all our staff, government and state department officials that work hard to make geothermal energy possible so that it may finally be part of our energy system in Chile.

References

Salar de Atacama Hauser, A. 1997. Catastro y Caracterización de las Fuentes de Aguas Minerales y Termales de Chile, SERNAGEOMIN, Boletín N°.50, 90 pgs. Lahsen, A, 1986. Origen y potencial de energía geotérmica en los Andes de Chile. In: Geología y Recursos Minerales de Chile. Ed.: J.Frutos, R. Oyarzún, and M. Pincheira. Univ. de Concepción, Chile, I, 423 – 438. Mineral Belt Lahsen, A; Sepúlveda, F.;Rojas, J.;Palacios, C.; 2005. “Present Status of Geothermal Exploration in Chile”, in Proceedings World Geothermal Congress 2005. Antalya, Turkey, 24-29 April 2005. Figure 8. North Interconnected Grid System, SING. Arica to Antofagasta Sernageomin, 2000. “Reglamento Identifica Fuentes Probables de Energía cities. Geotermica Decreto Nº 142, Ministerio de Mineria de Chile”.

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