Geodynamics: Geothermal Pilot Plant Could Be Further Delayed

online.wsj.com
August 21, 2009

Sydney (Dow Jones)--GeoDynamics Ltd. (GDY.AU) Friday said the commissioning of its planned geothermal energy pilot plant in South Australia state could be further delayed following the results of an investigation into an explosion at one its wells. Its shares plunged 14%. What the company described as a high-pressure leak followed a loud noise April 24 at the Habanero 3 well, which spewed water and steam until it was plugged with mud about a month later.

Geothermal energy is generated by extracting water heated by hot rocks up to five kilometers below the Earth's surface and using the steam to run turbines. The incident was a big blow for Brisbane-based GeoDynamics, which had just proved that its generating concept worked, and finished building the demonstration plant near the well in line for expected commissioning on April 27.

GeoDynamics said Friday that its investigation found that cracking in the well's casing material was caused by chemicals in the well reacting with its steel casing strings to release free hydrogen. The hydrogen was then absorbed into the steel casing materials in the low temperature zone of the well, causing it to crack.

In light of the findings, the company has installed cement plugs into Habanero 3 and another well, Habanero 2. Steps to secure a third well, Habanero 1, are underway, it said. "The implications for future well design, material selection and any revision of operational procedures are complex, but are within the bounds of general operational experience in the geothermal industry," GeoDynamics said in a statement. "These activities will take at least eight weeks and may lead to a revision of the previously indicated delay of six to nine months in the commissioning of the 1 MW pilot plant."

The company has well control insurance and said Friday it has lodged a claim seeking to recover "most of the costs" of the well control operation. It also intends to lodge another claim to cover the expected costs of drilling a replacement well for Habanero 3. India's Tata Group (TTA.YY) has a 10.2% stake in GeoDynamics and Australian integrated energy company Origin Energy Ltd. (ORG.AU) owns 6.8% of the company. The Habanero wells are being drilled by the Innamincka Joint Venture, of which Origin Energy has 30%.