Big Oil is using its deep pockets and expertise in well geology to back and partner with energy startups that are looking to unlock renewable energy from beneath the earth’s surface.
Geothermal energy, which has been around for decades, has received new momentum with the net-zero targets of many economies, including the United States.
Some of the biggest oil and gas firms, including Chevron, BP, and Devon Energy, are investing directly in geothermal projects and startups.
And some of the newly created geothermal companies are using horizontal drilling and hydraulic fracturing to reach the heat beneath the surface, using the technology that ushered in the U.S. shale revolution.
Drilling of wells to tap geothermal energy is expensive, but companies have managed to lower costs in recent years. Costs, however, need to further drop—and substantially—for geothermal energy to make up more than 1% of U.S power generation.
The U.S. Department of Energy looks to bolster the use of the “heat beneath our feet,” but only a small portion of that heat in the United States is accessible with current technology. So DOE is backing research and innovation to advance enhanced geothermal systems (EGS)—drilling for wells to access the heat deeper underground. A department-wide effort is aimed at dramatically reducing the cost of EGS—by 90%, to about $45 per megawatt-hour (MWh) by 2035, DOE says. Related: 2 Ways to Play Europe’s $800 Billion Energy Crisis
“Investments in EGS can unlock affordable clean energy for over 65 million American homes and exponentially increase opportunities for geothermal heating and cooling solutions nationwide,” according to DOE.
In 2022, the United States had geothermal power plants in seven states, which produced about 0.4% of total U.S. utility-scale electricity generation, the Energy Information Administration (EIA) says. California, Nevada, and Utah are leaders in geothermal energy in the U.S., with Hawaii, Oregon, Idaho, and New Mexico also generating some geothermal energy.
Several startups have recently launched new projects and raised capital to scale up operations, with the help of funding from Big Oil, employees with backgrounds in oil and gas, and horizontal drilling and fracking.
For example, Fervo Energy uses precision directional drilling technology to drill horizontally in geothermal reservoirs.
“This enables us to drill multiple wells from a single location, dramatically lowering our surface footprint and reducing drilling risks. Horizontal drilling also facilitates greater access to geologies that were previously challenging to reach, increasing the total resource potential for geothermal energy,” the company says.
Fervo used horizontal drilling in a project to deliver clean energy to Google’s data centers in Nevada—a project that became operational in November.
Just last week, Fervo said that it had raised $244 million in new funding led by Devon Energy. Oilfield services provider Helmerich & Payne, among others, is an early investor in Fervo.
The company says that early drilling results at Cape Station, a 400 MW project in Beaver County, Utah, show reduced drilling times and lower costs that significantly exceed Department of Energy expectations for EGS. Cape Station is expected to begin delivering clean electricity to the grid in 2026.
Drilling costs for Fervo’s first four horizontal wells for the Utah project have halved to $4.8 million per well from $9.4 million per well drilled at its first commercial project in Nevada, executives have told The Wall Street Journal.
Fervo targets to lower its electricity costs to around $100 per MWh soon.
Canada’s geothermal solutions firm Eavor Technologies also has oil companies among its investors. A $182 million financing round at the end of last year was led by Austria’s OMV, while existing investors, including BP Ventures, contributed and supported the funding round.
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Chevron, for its part, is using its sub-surface earth sciences with wells and drilling in geothermal energy projects to help lower the carbon intensity of its operations. The U.S. supermajor is teaming up with innovators, entrepreneurs, and governments to develop and scale new technologies. Chevron is pilot testing an advanced closed-loop geothermal pilot project in Japan in collaboration with Mitsui Oil Exploration.
In the United States, Chevron and Fervo Energy own two of the three winning projects that DOE picked last month to receive up to $60 million in funding to demonstrate the efficacy and scalability of enhanced geothermal systems.
Chevron New Energies’ pilot demonstration will use innovative drilling and stimulation techniques to access geothermal energy near an existing geothermal field in Sonoma County in northern California. Fervo Energy’s pilot within the Milford Renewable Energy Corridor in Utah aims to produce at least 8 megawatts of power from each of three wells at a site with no existing commercial geothermal power production. The third project, of Mazama Energy, aims to demonstrate a first-of-its-kind super-hot EGS on the western flank of Newberry Volcano in Oregon.
By Tsvetana Paraskova for Oilprice.com
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