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Can Big Oil Scale Geothermal?

Can Big Oil Scale Geothermal?

Geothermal could, in theory, be…

Irina Slav

Irina Slav

Irina is a writer for Oilprice.com with over a decade of experience writing on the oil and gas industry.

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What’s Holding Geothermal Energy Back?

It’s abundant, and it’s emissions-free: the heat from the earth’s mantle that reaches well into the crust and gives deep drillers a headache occasionally is the new star on the renewables block. Nevertheless, oil and gas companies have been somewhat reluctant to embrace it. Let’s first clarify: geothermal energy is only “new” in terms of the media attention it has been getting. Researchers - including people from the oil and gas industry - have been working for decades on technologies to extract the heat from the earth and either use it directly or turn it into electricity. It is only gaining prominence now as these technologies advance and the world’s attention becomes increasingly focused on alternatives to fossil fuels.

For the oil industry, geothermal is the alternative that, from a certain perspective, makes the most sense. Both oil and heat extraction involve drilling, so it should go without saying that the oil and gas industry is best placed in terms of expertise to exploit the benefits of geothermal energy. Indeed, the technology used to extract heat right now is extremely similar to the technology used for oil and gas extraction, up to and including fracturing the rock. Still, we hear very little about oil and gas supermajors allocating billions for geothermal exploration.

One reason, of course, is that right now is not the best time for major investments in new business. Now is the time to retrench and wait out the crisis. Yet some would argue this is the best time to diversify into a new business, and geothermal energy could be just the right business. This is where the challenges of geothermal come to the fore.

One of these challenges is the period it takes to make money from geothermal, according to Dave Waters, director and geoscience consultant with Paetoro Consulting UK. In comments following the Pivot2020 conference from earlier this month - an event dedicated to the present and future of geothermal energy - Waters listed a number of challenges for this industry. 

Related: Why Iran And China Are Pushing Iraq To Boost Oil Production

Making money was one of those challenges.

“The honest truth is that (so far anyway) it has been much harder to make large amounts of money on shorter term time scales (<5 years) in geothermal than it has been historically for oil and gas,” Waters wrote. “The money, when it comes (it does), takes longer time scales. Investors can reasonably ask – why bust a gut on hard long smaller stuff when short easy big stuff is available?”

Yet oil, it seems, is on its slow and torturous way out, and even OPEC is beginning to recognize it. Oil will not be around forever. So, from a longer-term perspective, it might pay the industry to rearrange its priorities concerning ROI expectations. And besides, geothermal extraction technology is constantly advancing: there is one company, Sage Geosystems, that says it can go from proof of concept for its heat extraction system to a working system that would feed a 10 MW power plant in just three years. By the way, Sage was founded by two oil and gas industry vets.

Another challenge is the high upfront costs for developing a geothermal energy system. This is a major problem for the oil and gas industry, especially now. And then there is the uncertainty.

“Wind turbines and solar do not need to spend millions first before they even know if they have a resource that might work,” Paetoro Consulting’s Waters notes in his comments. “The sun is there for everyone to see. The wind is there for everyone to feel. The rock temperature and permeability 3 km below is not.”

These are challenges that geothermal will need to overcome in some way or another, so its benefits - virtually inexhaustible if managed properly, zero-emissions - could shine. The good thing is that it is receiving support: the Department of Energy earlier this week announced it had allocated $28 million for five geothermal energy projects. Private investors are also a likely supporter of these technologies: wind and solar may be cheaper, but they are also intermittent and have finite lives; you don’t need to retire or recycle a geothermal well.


By Irina Slav for Oilprice.com

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