~ 20mwe demeter geothermal proposal, ruili, yunnan, prc · program, we would require capital input...

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East Brawley Geothermal Report Orita IBHX-001, Investor Summary

109 E 17th St., STE 4423Cheyenne, WY 82001Mailing: 1821 S Bascom Ave., STE 279

Campbell, CA 95008Phone: + 1 408.390.8877https://[email protected]

Until: 2019.07.31Created: 2019.01.25

2East BrawleyGeo Report

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DPG-LLCCopyright © 2019 All Rights Reserved

ContentsINTRODUCTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6

Funding Requirements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7Project Description and Location. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7

PROJECT HISTORY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8Additional significant permits and approvals are required to construct and operate a geothermal facility, including: . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8Accessibility, Climate, Local Resources, Infrastructure and Physiography . . . . . . . . . . . 8History of the Property . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8Geological Setting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9Exploration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9Drilling . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9

EXPLORATION DRILLING . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9RESOURCE ESTIMATES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10

Resource Estimates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10Planned Operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10Proposed Legal team . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11Energy and Infrastructure Practice: . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11

LEGAL REPRESENTATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11Our Services: Build Companies, Build Projects, and Arrange Financing . . . . . . . . . . . . . 12Our Clients . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12Geotechnical Services Provider . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13Qualifications . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13

GEOTECHNICAL SERVICES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13PROJECT RISK MANAGEMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14

Project Construction Risk & Financial Performance Insurance . . . . . . . . . . . . . . . . . . . . 14PROJECT RISK MANAGEMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15AON INSURANCE LETTER . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16PATENT FILING RECEIPT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18ABOUT US . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20

Who We Are . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20What We Do? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20

OUR TEAM . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21GEOTHERMAL RISK . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22

Location - Imperial Valley, California . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22Extensive Project Opportunities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22Reduced Risk - Known Resource . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23

RISK MITIGATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23

3DPG-LLCEast BrawleyGeo Report

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Copyright © 2019 All Rights Reserved

TASK/CAPITAL PLAN . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24Brawley, California Prospect 28MWe Net, 30MWe Gross . . . . . . . . . . . . . . . . . . . . . . . . 24Consulting Agreement - Operational Development Tasks Schedule . . . . . . . . . . . . . . . 25Pre-Construction - Operational Development Tasks Schedule . . . . . . . . . . . . . . . . . . . . 27Construction - Operational Development Tasks Schedule . . . . . . . . . . . . . . . . . . . . . . . . 29Online Operations Bridge - Operational Development Tasks Schedule . . . . . . . . . . . . . 31

CAPITAL NOTES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31CASE STUDY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32

East Brawley (Orita Project) Imperial Valley, California . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32

Design / Engineering . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33Turnkey Construction & Commissioning . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33

SERVICES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33PROJECT DETAILS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34

Preliminary Work Scope (Example For Discussion Purposes) . . . . . . . . . . . . . . . . . . . . . 34Contract Acceptance and Execution . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34Detailed Power Plant Design and Enginnering . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34Phase 1 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34Phase 2 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34Equipment Procurement and Construction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35Project Completion, Commissioning and Acceptance . . . . . . . . . . . . . . . . . . . . . . . . . . . 35Operations and Maintenance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35Phase 3 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35Phase 4 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35

PROJECT LOCATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36The project location is depicted on the following satellite images of the Imperial Valley. 36

LAND MAPS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37EXISTING PLANTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38

One of the most studied and productive geothermal resources in the world . . . . . . . . 38Proposed Power Plant Design . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39

TURBODEN TECHNOLOGY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39Dual Closed Loop Working Fluid Systems . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39

TECHNOLOGY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40Project Cost Savings from Previous Designs. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40Water Chemistry and IBHX Coating . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40Performance and Risk Management Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40Drilling and Logging . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40


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IBHX FUNCTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41Heat Exchanger Discussion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43Nomenclature . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43Greek Symbols . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43

APPENDIX A . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43THERMODYNAMICS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44

Geothermal ORC Power Plant Cycle . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44Power Plant Modeling & Simulation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45

MODELING . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45WELL ENGINEERING . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46

IBHX Geothermal Well Engineering . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46Best Practice Handbook . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46Temperature . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47

BEST PRACTICES GEOLOGY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47

Geology . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48Geochemistry . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48Drilling practices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48Well design . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48

BEST PRACTICES WELL DESIGN . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48

Casing depths . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49Casing diameters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49

BEST PRACTICES CASING . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49

Casing materials . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50Casing connections . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50Cementation of casings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50

BEST PRACTICES DRILLING . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50

Perforated and slotted liner . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51Drilling rig and associated equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51


Drilling fluids . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52Well control . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52



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List of FiguresFigure 1 Schematic of Aon Risk Management and Risk Mitigation Process and Flowchart.

Strategy combines all contracts, insurance finance and warranties under one point of management. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15

Figure 2 Imperial County Geothermal Wells. . . . . . . . . . . . . . . . . . . . . . 38

Figure 3 Schematic of traditional geothermal power generation . . . . . . . . . . 41

Figure 4 Schematic of IBHX geothermal power generation . . . . . . . . . . . . . 41

Figure 5 Schematic of ORC Mathematical Model . . . . . . . . . . . . . . . . . . . 45

Figure 6 Downhole fluid conditions - BPD . . . . . . . . . . . . . . . . . . . . . . . 47

Figure 7 Casing strings and liner for a typical well. . . . . . . . . . . . . . . . . . . . . 49


Running the open-hole liner . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53APPENDIX A RESEARCH . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53


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INTRODUCTION

East Brawley Geothermal Investment Imperial Valley, California, USA

This report follows up a recent trip to the Imperial Valley located in Imperial County, California. There are seven

Known Geothermal Resource Areas (KGRA’s) near the Salton Sea in Southern California. This report will focus on a

specific lease, the Emanuelli Orita Lease that is available in the East Brawley Geothermal Resource. We have had

direct telephone communication with the land owner and farmer that owns the surface and subsurface rights for

the 5 km2 existing lease. In addition, we have negotiated a purchase arrangement for the lease and, as of March 7,

2019, have accepted the offer to purchase the lease for development of the geothermal resource.

We were introduced to this landowner by a mutual friend that grew up in this area. They are long time personal

friends. This is important for several reasons. ..

• Generally, land owners in the area are critical of geothermal companies as the existing companies are not

good stewards of the land or the resource. Most of the existing power plants are unsightly and emit a lot

of steam. They are not polluting per Se but the emission of steam could be construed as pollution by those

unfamiliar with geothermal energy production.

• Our introduction gave us credibility and a warm reception. We were able to discuss not only the land

owned by our contact but also land owned by his friends and associates in the valley. If a land owner is not

impressed with you or your opportunity, they will not offer you access to their friends. This is very important in

this community.

• Our contact had a keen interest in our approach to geothermal power plant development. Our proposed use

of only 5 - 7 acres per well or 30MW power plant per well was viewed as a far better project opportunity than

the current operating power plants in the area. Our environmentally benign power plants would represent

good stewardship and our generous lease offer based on each operating production well was deemed as very

attractive.

This report will discuss our initial discovery regarding this lease both by our conversation with the landowner

and details obtained from the current lessor. Furthermore, we will suggest immediate funding needs to move

the project forward. We have a great deal of initial data regarding project development from the current lessor

in addition to past exploration performed by major oil companies. We must move quickly to obtain financing for

the lease as we were informed that there are other companies shopping the market and this is the only available

lease. We believe that we have an edge on the competition simply because of our technology and small footprint.

With the increased worldwide focus on geothermal energy as a baseload energy generation solution, many

companies are vying for position in the best resource areas. That means that the Imperial Valley is highly sought

after. There are many companies seeking land and subsurface rights. There are currently twenty-six operational,

approved or planned projects in various stages of development in the Imperial Valley. One might think that the

field is crowded but quite the contrary, the resources really are that good. This area presents undoubtedly the best opportunity to launch our IBHX.

It is imperative that we proceed quickly but cautiously. Initial seed capital is required to continue our momentum.



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INTRODUCTION

We are currently unable to fund further research that is needed as well as pay for professional services, geological,

legal and financial. We have exhausted the freely available resources to obtain the information we have gained so

far. At this point, we need to retain a legal team that specializes in geothermal regulatory and project permitting

in addition to the siting of geothermal power plants in California. Good news is that this lease already had a

permitted project and had obtained all environmental and interconnection reviews. Three idle wells exist on the

lease and we will utilize them for our projects.

These personnel and professional services resources are needed now to provide preliminary input into the design

and engineering resources that will be needed later in the development cycle.

Funding Requirements

We suggest an initial consulting arrangement not to exceed $750,000 to retain legal representation, fund the

research that is ongoing, cover travel expenses, set up an office in the project area, and define the JV structure, etc.

The $1MM equity raise would be used to acquire the lease, fund office operations for the first six months, renew

and/or reapply for all permits and begin well confirmation and geological resource studies. To fully fund the initial

project through to confirmation of the resource and underwriting of the Construction and Performance Insurance

program, we would require capital input of $5MM. Additional equity would be introduced as the project moves

into later phases as would the debt financing secured by the insurance contract.

Following is a description of the Orita Project provided by the previous lessor. This lessor discontinued the project

in 2012 due to financial difficulties and had intended to start up again at a later date. They were acquired and

the current owner prefers to dispose of the lease and obligations. (Italicized text represents information obtained from and written by others. We assume no responsibility for the accuracy of the information provided.)

Project Description and Location

“The Orita Project is a planned project to develop, construct and operate a geothermal electric generation facility, an

electric switchyard with transmission interconnection, a geothermal wellfield, and related auxiliary systems at a location

approximately 11 miles east of Brawley, California (the “Orita Project”). The Company estimates that the 3,125 acre

leasehold may support a commercial size geothermal resource potential based upon data in their extensive proprietary

database. The site is located within the East Brawley Known Geothermal Resource Area (“KGRA”).

The Company secured geothermal and surface leases at the Orita Project in 2009 (the “Orita Project Leases”). The Orita

Project Leases provide for an initial term of five years. If certain performance standards are met prior to the expiration

of the initial term, the term of the leases is extended for another five years. Once production of electricity begins, the

leases continue as long as electricity or other geothermal resources are being produced in commercial quantities.

Reasonable outage periods are allowed under the leases for maintenance, equipment replacements, and force majeure

events.

Annual rental payments are payable on each lease or have been prepaid. Royalties are payable on each geothermal

lease based upon gross revenue derived from the sale of electricity. Royalties are also payable based upon the gross

proceeds received by the Company from any sale of extractable minerals or from utilizing hot water, steam, or thermal

energy for purposes other than power generation. The pertinent royalty to be paid to the geothermal interest owners is

Four percent (4%) of the proceeds from the sale of electric power.


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PROJECT HISTORY

To the Company’s knowledge no environmental liabilities exist at the Orita Project site. Several significant permits have

been secured for the initial exploration phase of the project including:

• An Imperial County Conditional Use Permit providing for drilling of six wells;

• A California Environmental Quality Act Initial Study/Negative Declaration;

• An Imperial County Air Pollution Control District Authority to Construct;

• A California Regional Water Quality Control Board Waste Discharge Requirement; and

• California Division of Oil, Gas, and Geothermal Resources Permits to Conduct Well Operations.”

Additional significant permits and approvals are required to construct and operate a geothermal facility, including:• An Imperial County Conditional Use Permit providing for construction of remaining wells, pipelines, generation

facilities, and other associated structures;

• A California Environmental Quality Act Environmental Impact Report;

• An Imperial County Air Pollution Control District Authority to Construct;

• A California Regional Water Quality Control Board Waste Discharge Requirement;

• A California Division of Oil, Gas and Geothermal Resources Notice of Intent to Drill a Geothermal Well; and

• A California Division of Oil, Gas and Geothermal Resources Injection Project Permit.

Accessibility, Climate, Local Resources, Infrastructure and Physiography

The Orita Project is accessible from paved and unpaved state and county roads and is approximately 11 miles east of

Brawley, California. Brawley, the nearest population center, had a population of approximately 22,000 in the 2000

census. Rail, road, and sea transportation from the Los Angeles port is adequate for shipment of heavy equipment to the

project site. The local county graded and paved roads are adequate to support construction of the project.

The Company intends to rely upon excess water generated by operation of the Orita Project to generate some of the

water necessary for cooling. This water generated by operation of the Orita Project is a byproduct of the conversion

of geothermal steam into energy. Additional makeup water is expected to be purchased by appropriation from the IID.

Sufficient surface rights are present in the existing Orita Project leases to construct and operate one or more geothermal

generation facilities. The net power production from the Orita Project plant will be delivered by a short radial line and

interconnected to the IID 230 kV transmission line, which is along the East Highline Canal.

The topography of the Orita Project is characterized by flat terrain bisected by irrigation canals, drains, and other

irrigation structures. The ambient temperatures range from 61°F to 122°F (16°C to 50°C). The elevation of the proposed

site is 26 ft. (8 m) below sea level. The average annual precipitation is approximately 2.4 to 2.8 inches (6-7 centimeters)

per year. The predominant vegetation is farmed crops.

History of the Property

Concurrent with the KGRA designation in 1981, a total of eight deep exploration wells were drilled by Unocal, Occidental

and Phillips Petroleum in the area. These wells were completed at depths from 8,500 ft. to 13,600 ft. (2,590 m to 4,115

m) and all encountered high temperature geothermal resources with temperatures as high as 576°F (302°C). Testing of



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one well confirmed flow rates in excess of 500,000 lbs per hour at a well head pressure of 560 psig, demonstrating a

6 MW capacity from the seven inch diameter well. In addition, operators drilled shallow gradient and slim-hole wells

that confirm the extent of the thermal system, and borehole geophysics and mud logs are available to quantify and

characterize all sandstone units that may be potential production horizons.

Commercial diameter wells are expected to produce at levels of up to 12 MW or greater in this resource. The flow tests

demonstrate that a deep high salinity reservoir is present. The temperature profiles within the 14 mi2 (39 km2) area

tested by the existing deep drilling are similar and all demonstrate temperatures of 400°F (205°C ) at a depth of 7,000

ft. (2,134 m). The Orita Project property was leased from the owners of the surface and geothermal mineral interests.

There are no override interests on these Orita Project leases.

Geological Setting

The Imperial Valley is a favorable area for geothermal development with high temperature geothermal resources

identified in areas where the generated power can be relatively easily connected into the local grid. Imperial Valley

geothermal systems occur within the Salton Trough, an area that marks the transition between two major geologic

provinces. To the south, sea floor spreading characterizes the area that includes the Sea of Cortez in the Baja California

Province. To the north, the San Andreas Fault system dominates the structural setting. Either process can produce local

areas of extended crust that provide enhanced permeability for development of geothermal systems. The process of sea

floor spreading adds the element of magma intrusion as an enhanced heat source within the already high regional heat

flow of the thin crust within the Salton Trough. This later process is most evident within the Salton Sea geothermal

properties where the resulting geothermal resource exceeds 600°F. The total estimated capacity of the Greater Salton

Sea area in the Imperial Valley is over 22,000 MW.

The geology of the Salton Trough is dominated at drillable depths by Quaternary and Holocene deposits related

to Colorado River delta processes. These sediments represent a range of sedimentary environments including true

deltaic sediments, lacustrine units, eolean deposits and coarser clastics derived from uplifted units in mountain ranges

bounding the trough.

Exploration

The Company conducted a magnetotelluric survey, a seismic survey, and a gravity survey at and in the vicinity of the

Orita Project area. Results of these surveys are being utilized to support the Company’s plans to develop one or more

power plants at the Orita Project area.

Drilling

In April 2010, the Company commenced its drilling program starting with Orita No. 2 well, which was drilled targeting

the successful production zone encountered in the Emanuelli #1 well drilled in 1982. The Emanuelli #1 well produced

approximately 500,000 pounds per hour, which indicated commercial viability. Drilling on the Orita No. 2 well was

suspended at a depth of 9,267 ft. due to mechanical problems, and the well was lined with perforated casing, cleaned

and tested. A maximum temperature of 457˚F was measured in the well still cooled by drilling mud. A flow test

produced fluids that confirmed the desired low-salinity benign chemistry but only marginal permeability at this depth.

In July 2010 drilling commenced on the Orita No. 3 well. In September 2010, the well was completed to the targeted

EXPLORATION DRILLING


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RESOURCE ESTIMATES

depth and showed significant hydrothermal alteration and had intercepted a major fault controlled low-resistivity zone

with loss circulation. Bottom hole temperature of the well was in excess of 450˚F. The well was successfully cased to

9,198 ft., however, the perforated liner was damaged during installation and productivity testing could not be successfully

completed.

Following a number of mechanical drilling problems, consisting mainly of drilling tools and drill rig equipment failing,

both above and below ground, the Orita No. 2 well was re-drilled from the bottom of its casing string at an approximate

5,400 ft. depth to a total depth 12,959 ft. On December 21, 2010, the Company successfully flow tested the Orita No. 2

well. The well was flow tested with a sustained flow rate of approximately 500,000 pounds per hour at 155 psig.

In the January 2011, the Company commenced drilling of the Orita No. 4 well at the previously drilled and proven

Emanuelli #2 well location. The Orita No. 4 well was drilled to a depth of 14,325 ft. and initial flow testing shows fluid

entries at 10,100 ft. and 11,500 ft. with 555°F measured at 12,430 ft. under flowing conditions. A long-term flow test

was completed in late June 2011. The well exhibited erratic and surging flow behavior with an inability to achieve

completely stable conditions. The final flow was estimated to be around 3 MW at a flowing pressure of 120 psig, but was

inconsistent and unstable. The well test was terminated and the Company is assessing its viability as a commercial well.

The Company is assessing the feasibility of completing further analysis and evaluation of the Orita resource and project

development potential by Company personnel and independent parties including GeothermEx and SKM, including

structural geology and geophysical examination of the field results from the drilling experiences of the three Orita wells

drilled to date. The feasibility of completing brine chemistry analysis to aid in determining resource characteristics and

compatibility with power plant parameters will also be evaluated. In conjunction with these studies and their results, the

Company will determine whether completing the long term test of Orita 2 will be necessary in evaluating the resource

and the viability of further project development. The testing of Orita 2 would involve injection into Orita No. 4, which

may cause positive changes or improvements to the flow potential and behavior of Orita No. 4.

Resource Estimates

The Company estimates that the reservoir may have the potential to support as much as 300 MW within the current

leasehold of about 5 mi2 (14 km2). Additional leasing in the Orita Project area could increase the MW potential. This

estimate is based upon known geologic information from the wells that were drilled and geophysical information that

was gathered by UnoCal, Occidental, Phillips, and others. Additional information about the size and quality of the

reservoir will be available when the Company obtains additional information from its geophysics and drilling program.

Planned Operations

In 2009, the Company entered into a 20 year PPA for the Orita Project with SCE. The contract was for an initial facility

between 40 and 100 MW with two expansion options of equal capacity. In addition, to transmit power from the Orita

Project, the Company had a transmission reservation on the Path 42 line that consists of a thirty-five mile long, double

circuit 230kV transmission line segment between the IID Coachella Valley Substation and SCE Devers Substation.

On August 31, 2011, the Company terminated the PPA with the SCE because it was not able to meet the critical milestone

schedule as outlined in the PPA for development of the Orita Project. As a result of the termination of the Orita PPA, the

Company also assigned its rights associated with the Path 42 line to unrelated third parties. The Company plans to re-

evaluate the economics and feasibility and future resource development plan for the Orita Project once additional funds



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are available.

Proposed Legal team (Initial Engagement Letter Pending)

Due to the generally large scope of development on a project of this size and nature, retention of a top legal

team is essential. Through our research we came across a presentation by Andrew T. Braff, Esq., Attorney, Wilson

Sonsini Goodrich & Rosati, P.C. (WSGR) entitled: “Geothermal Leasing 101: Federal, State and Private Lands.” The

presentation includes some very important information and is a source of reference for this document.

As a leading law firm, though, they are not limited to one area of expertise. They can provide us with Energy and

Infrastructure law, services, leading IP and patent law services as well as tax/audit services. WSGR maintains

offices in Los Angeles, San Francisco and Palo Alto, in California, Washington DC, and New York on the East Coast

and Beijing and Shanghai in China.

Website: https://www.wsgr.com/WSGR/Display.aspx?SectionName=practice/energy-finance/index.htm

Energy and Infrastructure Practice:

When it comes to structuring and closing groundbreaking transactions in the new energy economy, Wilson Sonsini

Goodrich & Rosati has become the firm of choice for leading companies, investors, and lenders.

No other law firm combines more than 50 years of undisputed leadership in technology and business model innovation

with a sophisticated, experienced energy project development and finance practice. This combination makes us

exceptionally well suited to serve as a strategic advisor to innovative companies at all stages of development, and

enables us to provide top-tier legal counsel in everything from patents to project finance, and government affairs to tax

structures. Further, WSGR is often involved in first-of-their-kind projects, financings, and transactions—deals that are

fundamentally changing the ways people power their homes and factories, fuel their vehicles, and manufacture the next

generation of plastics and chemicals.

Our Integrated, Multidisciplinary Team

WSGR has a fully integrated team of attorneys with industry-relevant, practical experience that ranges from securing

venture financing and protecting intellectual property for clean energy start-ups to developing and financing large-scale

energy and infrastructure projects around the world. For each assignment, and depending on client needs, we assemble

the right personnel and expertise, offering our clients the advantages of working with a collaborative, coordinated team

that maintains a commercial-minded focus on the needs of project participants.

When we work with early-stage clean energy companies, our approach is guided by the firm’s 50-plus-year history

of helping innovative, disruptive companies grow. For project development and project finance clients, we take a

commercial-minded, practical approach focused on meeting the varied needs of project participants. For project

investors, banks, and other lenders, in addition to delivering substantial value through our energy market and

infrastructure finance expertise, our attorneys are known for their innovative and influential approach to deals, and for

completing several first-of-their-kind transactions. In fact, another quality that sets our attorneys apart is our long-

standing relationships with venture capitalists, private equity firms, and major financial institutions across the U.S. and

abroad, which allow us to serve as a conduit to—and advisor regarding—a wide variety of funding sources.

LEGAL REPRESENTATION


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LEGAL REPRESENTATION

Regardless of the type of client we’re representing, our aim is to create alignment between both concurring and

conflicting interests, and to help clear the way so deals get done. This point is best illustrated by the growing number of

venture financings, megawatts, purchase power agreements, and other closed transactions associated with WSGR.

Our Services: Build Companies, Build Projects, and Arrange Financing

When we describe our team as “multidisciplinary,” it means that in addition to each attorney’s energy sector expertise, we

bring together the skills and resources clients need to pursue and achieve desired results. More importantly, it means we

can assist clients across all project phases, from development and financing to expansion or renewal options.

• The comprehensive scope of our energy and infrastructure services can best be summarized in three points:

• Our corporate, start-up, and venture capital team builds companies.

• Our commercial and regulatory development team builds projects.

• Our asset and infrastructure team (consisting of attorneys with tax/tax equity, private equity/debt, structured

finance, and/or bankruptcy expertise) arranges financing for infrastructure projects, from energy storage facilities

and wind farms to roads and bridges.

Our Clients

WSGR’s sophisticated energy practice is anchored by experienced and creative attorneys who represent more than

400 clients across several industries, including innovative renewable and clean energy companies, established entities

developing and financing large-scale infrastructure projects, and large public and private companies involved in

significant energy initiatives. WSGR also represents leading venture capital firms, private equity firms, energy project

investors, and other lenders actively involved in commercializing energy innovations and project finance.

Within the expansive energy industry, WSGR represents renewable and clean energy producers, advanced fuels and

chemicals companies, traditional electric power generators, and other innovators operating in developing areas. For



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example, our energy industry clients operate in the following sectors:

Geotechnical Services Provider (Initial Engagement Discussed, Awaiting Scope)

Our choice for geotechnical services is perhaps the most knowledgeable team of geoscientists available in one

company. They are located in Richmond California and have been instrumental in the development in all KGRA’s in

the United States as well as globally. Their staff includes geologists, geophysicists, geochemists and hydrologists. A

subsidiary of Schlumberger, Geothermex is the undisputed leader in geothermal assessment, analysis, engineering

and consulting globally.

Website: www.geothermex.com

Qualifications

GeothermEx is a U.S. corporation, in business since 1973, specializing exclusively in providing consulting, operational

and training services in the exploration, development, assessment and valuation of geothermal energy. We are the largest

and longest-established such organization in the Western Hemisphere. The staff consists of specialists in geosciences

(geology, geochemistry, geophysics, hydrology), engineering (drilling, well testing, reservoir, production, power plant,

chemical), computer science and economic analysis. All technical staff members have advanced degrees and lengthy

geothermal experience (average 20 years), with several members having more than 25 years in the geothermal industry.

• GeothermEx’s clients include:

• petroleum, mining and independent power companies requiring assistance in exploration, drilling and field

development;

• electrical utilities requiring independent evaluation of geothermal projects;

• financial organizations requiring advice on loan, acquisition and grant programs;

• agencies of governments requiring advice on regulations, policy issues or resource inventory; and

• land owners, legal counselors, and engineering companies requiring specialized technical assistance.

GeothermEx has been associated with hundreds of projects in 53 countries. The company has been involved in the

development of all the producing geothermal fields in the United States, with a total installed power capacity of nearly

GEOTECHNICAL SERVICES

• Biofuels, biomass energy, and biochemicals

• Clean fossil fuels and carbon management

• Distribution microgrid

• Energy efficiency

• Energy storage and battery technologies

• Fuel cells, combined heat and power, and waste heat

recovery

• Geothermal power

• Green building and industrial technology

• Waste to energy

• Hydrokinetic, wave, and tidal energy

• Natural gas

• Pollution reduction and resource management

• Smart grid and advanced scheduling and trading

• Solar power

• Transmission

• Transportation, electric vehicles, and related

infrastructure

• Wind power


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PROJECT RISK MANAGEMENT

3,000 megawatts. GeothermEx has carried out detailed geothermal exploration, drilling, field development and/or

assessment projects for government agencies or private companies in more than 20 countries; for example: Argentina,

Canada, China, Costa Rica, El Salvador, Guatemala, Honduras, Indonesia, Iran, Italy, Japan, Macedonia, Mexico, New

Zealand, Nicaragua, Papua New Guinea, Peru, Philippines, Portugal (the Azores), and Taiwan. GeothermEx has also

carried out geothermal reconnaissance and evaluation projects for both U.S. and foreign governments and international

agencies (such as United Nations, World Bank and Interamerican Development Bank) in nearly 20 countries; for

example, Bolivia, Bulgaria, Djibouti, Ethiopia, Fiji, Hungary, India, Jordan, Kenya, Madagascar, Mozambique, Panama,

Samoa, St. Lucia, Thailand, Turkey, Uganda, Vietnam, and Yemen.

GeothermEx has also conducted technology transfer or training projects in many countries, including Bolivia, Brazil,

China, Costa Rica, Greece, Japan, Nicaragua, New Zealand and Philippines.

GeothermEx’s experience includes the development of both conventional geothermal resources and Enhanced

Geothermal Systems. GeothermEx’s specialties include:

• Design and implementation of exploration programs.

• Design and management of drilling projects.

• Design, execution and interpretation of well logging and testing.

• Conceptual modeling based on integration of geologic, geochemical, geophysical, drilling and well-test data.

• Reservoir engineering and numerical simulation of reservoirs.

• Wellbore simulation and well design.

• Optimization of resource use.

• Design of power plants and gathering systems.

• Economic evaluation, risk appraisal and project financing support.

• Monitoring and maintenance of producing fields.

• Project feasibility studies.

• Assistance in contract negotiations, legal proceedings and arbitrations.

• Assistance to government agencies in formulating regulations and policies related to geothermal energy.

GeothermEx has conducted due diligence and verified resource adequacy for financial institutions in nearly all

geothermal projects in the United States and abroad financed by bank loans or bonds. This has enabled the

development of more than 7,000 MW of geothermal power, the total financed to date exceeding US $11,000,000,000.

Project Construction Risk & Financial Performance Insurance

Aon Insurance is our choice for a risk management strategy designed to reduce or eliminate the risk associated

with geothermal exploration and exploitation. The program consists of insurance products, program management

consulting and financial guarantees that enforce contracts and assure project completion while guaranteeing the

financial performance during the first year of production.

Proving and validating the technology while it is still undergoing the U.S. patent review process and remains

proprietary, prompted the inventor to previously seek third party validation. The technology was presented to

Aon Insurance for their consideration in managing or outright mitigating the financial risk associated with the



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development of the first geothermal project in the Imperial Valley.

Aon Insurance provides Risk Management solutions for oil exploration, mining and other high cost, high risk

exploration ventures. Not surprisingly, they had an underwriting chemical engineer and Vice President at Aon,

Mr. Thomas McBeath, P. Eng., that reviewed the technology and understands it. He has worked with the inventor,

Dr. Ted Sumrall, to develop an insurance and risk mitigation program that incorporates risk management, project

management, contract management and insurance products into a total risk management and risk mitigation

service. The program encompasses 95% of the total financial risk of developing geothermal power plants using the

IBHX. This covers the drilling and exploration, the engineering and fabrication of the IBHX, the engineering and

construction of the power plant and incorporates all of the procurement and construction contracts under a single

source program manager so that, in the event a claim must be made, investors only have one company to deal

with. The program may also be used to collateralize debt financing for a complete coverage solution.

In addition to the project development and construction protection, a performance guarantee assures that the

proposed geothermal project will produce the estimated power output. Should it not, Aon protects investors

with payments of up to 95% of the proposed first year revenue while working to rectify the shortfall with the

PROJECT RISK MANAGEMENT

Figure 1: Schematic of Aon Risk Management and Risk Mitigation Process and Flowchart. Strategy combines all contracts, insurance finance and warranties under one point of management.


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AON INSURANCE LETTER

contracted vendors.

Below is a letter from Mr. McBeath of Aon Insurance which outlines the process and procedure and the coverage

that the insurance will provide. A letter has been requested that addresses the specific requirements for this project.



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AON INSURANCE LETTER


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PATENT FILING RECEIPT


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ABOUT US

Having a strong international team helps us offer both efficient and cost effective geothermal solutions customized perfectly for our clients needs.

We are an international collaboration of professionals and

companies that provide high quality, cost effective solutions in

renewable energy project development, engineering, equipment

procurement and construction. We deliver premium renewable

energy solutions throughout the world.

We work with a wide range of valuable suppliers and

technologies in our endeavor to provide our clients with

quality, cost-effective solutions to their energy needs. We have

an experienced and dedicated team of energy professionals.

We are your best choice for a wide range of renewable energy

technology development, engineering and construction services.

Who We Are What We Do?

Our professionals have proven industry and technical experience

and use innovative system design and construction techniques

along with standard methodologies to provide innovative

energy solutions on time and under budget. We are committed

to delivering excellent services focused on quality of work, cost

control and time management.

We strive to improve the quality of our technology offerings

and by applying this, unleash the inherent underlying potential

of our system designs. Our vision is to provide first rate, high

quality power generation solutions to our clients. Meeting these

requirements allows us to exceed our client’s expectations while

we expand and propel our professional business growth.

We develop geothermal power plants utilizing an exclusive heat

recovery technology. In addition, as 50% joint owners of these

power plants, we perform all O&M for the life of the projects.

• Project Development / Project Management

• Conceptual Design / Systems Engineering

• Technology Specification / Technology Procurement

• Project Construction / Operations & Maintenance



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Thousands of candles

can be lit from a single candle,

and the life of the candle will not

be shortened. Happiness never

decreases by being shared.

OUR TEAM

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IBHX

Investor ROI

Project Developer

Proprietary Tech

We have a clear understanding of geothermal project development requirements, and we have the knowledge, skills and experience to successfully complete the proposed project.

Drakon Power Group LLC (DPG-LLC) is a unique renewable energy development company. Our goal is to provide a versatile integrated project solution, specifically designed to guarantee the success of the Owner/Investor/Client from pre-construction design to O&M for the life of the power plant. We have built strong relationships with leading renewable technology manufactures and leverage them to provide our clients with the most cost and energy efficient renewable energy systems in the industry.

As a consultant, DPG-LLC brings a flexible and nearly endless list of available services focused on our client’s project needs. From simply providing our clients with Tier 1 rated renewable products, to design-build engineering and construction consulting with onsite support, we deliver quality. In addition, DPG-LLC has the relationships to provide various project financing programs

and options. This allows DPG-LLC to assist in bringing any size project to construction and

completion.

Seed Capital Requirements - We have multiple project development opportunities to pursue in

the Imperial Valley. We propose forming a Joint Venture and seeking equity and debt financing for

each project. DPG-LLC will retain a 50% interest in each JV. However, DPG-LLC first needs to raise

seed capital to continue the pursuit of the initial ground work and research for the acquisition

of surface land and subsurface mineral rights. Our Capital requirements are initially $1MM first

stage followed by up to $5MM in later stages.

Seed money will be used for legal, consulting and accounting professionals as well as minimal

staffing and salaries. Title searches are necessary to determine clear paths of ownership of

subsurface rights. We have a legitimate lease to acquire with previous project work having

been performed and permits issued. Upon acquisition, a confirmation drilling program should

be defined and executed. This is a necessary step to gain information needed to engineer our

production wells.

Consulting geologists and a well logging company should be

considered early on to assure proper analysis of existing data

and consult on proper land acquisitions. Civil engineering is

required to layout our well locations and pads. Finally, drilling

engineers and contractors will need to be interviewed and

hired. With appropriate funding in conjunction with favorable

well prospects, drill rig acquisition might also be a wise

choice.


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GEOTHERMAL RISK

Location - Imperial Valley, California Extensive Project Opportunities

Geothermal energy as a heat source for electricity generation

is a renewable energy with many advantages: It is base load energy, it is produced local to where it is consumed and it is environmentally friendly.

The Imperial Valley is known as one of the most productive

natural geothermal resources in the world. It is estimated that

as much as 20,000MWe of electricity could be generated in this

area alone. Of course transmission and other factors will limit

that, but still, the opportunity is enormous.

Typically, the bankability of a geothermal project is threatened

by the geological risk. The geological risk includes the risk of

not finding an adequate resource (short-term risk) and the risk

that the resource naturally declines over time (the long-term

risk). The Salton Sea and other resources in the Imperial Valley,

simply are, the very best resource for our IBHX thus the initial

short term risk for projects here has already declined while the

long term risk is greatly alleviated by the conservative use of the

geothermal heat that the IBHX extracts.

Existing wells in the area range in depth from tens of meters

to over 4000 meters. Typically, though, most wells in production

seem to be only 400 meters to 2000 meters. There is an

abundance of well temperature data that all indicate that the

temperature gradient is on the order of 9°C - 10°C per 100

meters.



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RISK MITIGATION

Imperial Irrigation District commissioned a geological report

(Available as separate Addendum) that analyzed the probability

of great geothermal resources in their territory. The following

map depicts the findings. Higher numbers in the grid represent

higher probability and thus, less risk while lower numbers

represent lower probability and higher risk. The Imperial Valley

represents perhaps the best possible resource to prove the IBHX

technology.

Risk will be further reduced by the retention of Geothermex for

our geothermal consulting geologists and engineers. The wealth

of knowledge and best practices they have in the Imperial Valley

is second to none.

Data found during our research and included in this report

was obtained in part from documents that Geothermex has

contributed to. They are intimately familiar with the Orita project

as they had involvement with the previous developer.

WSGR has provided legal services for many of the geothermal

operators in the Imperial Valley as well as the utilities and the

government agencies.

Our strategy is to retain highly knowledgable contractors that

have experience working in this KGRA to minimize development

risk and maximize our potential for success.

The KGRA where the project it located is indicated by the circle

on the grid to the left.

Upon request and under NDA, we can provide well drilling

reports, well logs, and geological assessment of the lease area.

All of this data serve to reduce risk as we have less exploring to

do and really only need to confirm the resource. Because three

wells exist on the lease, we can choose the best one to develop

first. The well can be reworked and drilled to a deeper depth if

necessary and our IBHX can be engineered for this well. Or, if

budget permits, we can drill a new well specifically engineered

to optimize the highest performance of the IBHX.

Following are our budget projections as well as our high-

level project plan. We propose the initial capital input be a

consulting arrangement while we work on initial tasks to form

the JV structure and company. We would obtain office presence

in El Centro, California and commence project development

immediately upon receipt of funds.

Reduced Risk - Known Resource


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TASK/CAPITAL PLAN

Brawley, California Prospect 28MWe Net, 30MWe Gross

Start Up to Pre-Construction Capital

Operating Capital Budget $750,000

Projected Capital Cost $716,499

Contingency of Capital Budget $33,501

Total Duration - Consulting in to Pre-Con: 2 Months

East Brawley (Orita) Consultancy Agreement - Operational Funding Breakout

Start Up to Pre-Construction Tasks

Salary - (2) Energy Development/Construction Director $56,000

Legal Services- Lease/Struct./Contracts/Retainer $105,600

Lease Procurement + Pro Rata 6/mo Lease Payments $221,700

GeothermEx - Data Rev/Relog/New Report/Quote Well Eng $119,850

Brine Sample Collect/Chem Analysis/IBHX Coating Design $65,000

Vehicles/Fuel/Project Pre-Development Travel Expenses $85,360

Establish Fully Functional/Operational Office Presence $30,720

City/County Business License/Liability Insurance 1yr term $1,725

Lodging/Sub/Geo Ind. Member Fees/Research/Education $30,544

Consulting Argeement Projected Capital Cost Total $716,499

East Brawley (Orita) Consulting Argeement - Operational Development Tasks Breakout

Note: The Contingency of Budgeted Capital is money that will roll forward from one phase to the next as cost savings and/or value engineering savings are realized over the overall project duration of 30 months. Thus the balance of contingency budget funds will be returned or credited back to the funding source to reduce the total debt.



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TASK/CAPITAL PLAN

Consulting Agreement - Operational Development Tasks Schedule

Pre-Construction into Construction Capital

Operating Capital Budget $1,500,000

Projected Capital Cost $1,374,388


Total Duration - Pre-Construction into Construction: 4 Months

East Brawley (Orita) Pre-Con - Operational Funding Breakout


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Pre-Construction into Construction Tasks

Salary - (2) Energy Dev/Const Dir./(1) Support Staff $124,800

Legal Services- Rev-Ex PPA-Interconn/Permitting/Retainer $217,480

Land Lease - Paid in Full/2019-2020 Payment Due August 9 $0

GeothermEx - Begin/Complete Well Bore Engineering $480,000

IBHX - Chemical Analysis-Coating Composite Testing $62,500

Turboden - Well Log Data/Heat Bal Mod/Meeting/Site Visits $34,240

Create Construction Set Engineered Drawings $270,000


Operational Office Presence $35,560

City/County Business License/Liability Ins 1 yr term (Paid) $0


Pre-Con Projected Capital Cost Total $1,374,388

East Brawley (Orita) Pre-Construction - Operational Development Tasks Breakout

TASK/CAPITAL PLAN



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TASK/CAPITAL PLAN

Pre-Construction - Operational Development Tasks Schedule

Construction into Online Operations Capital




Total Duration - Construction into Online Operations: 22 months

East Brawley (Orita) Construction - Operational Funding Breakout


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TASK/CAPITAL PLAN

Construction into Online Operations Tasks


Legal Services- Const. Contracts/Permits/Retainer $1,033,010

Land Lease - Monthly Construction Phase Payment $88,000

Site Improve/Well Pad Prep $117,000

GeothermEx - Supervise Well Bore Drilling $5,000,002

IBHX Finalize Coating Material/Purchase 25% 65% 10% $22,953,000

Turboden- Meet/Final Approval/Purchase 25% 70% 5% $27,000,000

Gen Sub 6kV/115kV -Design/Engineer/Construct $1,400,040

Main Sub 115kV/230kV -Design/Engineer/Construct $4,400,060

Transmission Interconnect $550,080

Foundation -Design/Install $270,000

Generator Bld/Control Rm $400,008

Site Fence/Vid Sec/Int Srv $154,000

Construction Insurance $1,155,946

Construction All Trades $5,450,004

Construction Drawings As-Built Revisions $39,600


Office Expenses $248,040

City/County Business License/Liability Ins 1yr term $4,210


Construction Projected Capital Cost Total $71,746,724

East Brawley (Orita) Construction - Operational Development Tasks Breakout



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Construction - Operational Development Tasks Schedule

TASK/CAPITAL PLAN

Online Operations Bridge Capital




Total Duration - Online Operations Bridge: 4 Months

East Brawley (Orita) Online Operations Bridge - Operational Funding Breakout


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Online Operations Bridge Tasks


Legal Services- Const. Close Out/Op Permits/Retainer $92,120

Land Lease - Monthly Construction Phase Payment $4,000

Monthly Genernation Cost 50% Power Output $283,868

Monthly Generation Cost 100% Power Output $930,705

Debt Service - 4 Months $2,161,086

Performance Insurance $342,000


Office Expenses $48,365

City/County Business License/Liability Ins 1yr term (Paid) $0


Online Bridge Capital Cost Total $4,135,912

East Brawley (Orita) Online Operations Bridge - Operational Development Tasks Breakout

TASK/CAPITAL PLAN



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Online Operations Bridge - Operational Development Tasks Schedule

Note: Phase 4 - The operational bridge fund is a contingency to ensure that operating capital exists to carry and cover the operational expenses of the generation facility and supportive systems during and through the end of phase 3 (online/operational state) to the first revenue payment for the generation produced. The balance of unused bridge funds will be returned to the funding source after the first full quarter of operation production generation payments are realized.

The money for the phase 4 bridge can originate from the rolling contingency fund from Start Up through Phase 3. Six months of bridge has been budgeted, but only 4 months of bridge funding might be consumed.

CAPITAL NOTES


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• Conceptual Design, Pre-Engineering On time & on budget

• Project Development and Equipment Procurement Early & on budget

• Construction and Commissioning On time & under budget

CASE STUDY

In order to develop a geothermal project that fulfills all the goals of the JV parties and investors, the project development and project management will take place in several distinct phases:

Our approach to geothermal power plant design and development will challenge your current thinking on what a geothermal plant

requires. From inception, our system requirements are fundamentally different. We only require a production well. No injection well(s)

is/are required. Our well temperature requirements are not as high as typical geothermal plants. Our equipment is skid mounted and

we use driven steel foundations wherever we can which eliminates concrete requirements lowers cost and speeds construction time

considerably.

Put simply, anywhere we can save cost, we do... without compromising quality. We care about developing the lowest cost energy

generation systems. Delivering the industry best IRR to our finance partners is our goal. Completing projects under budget and on

time is our passion.

East Brawley (Orita Project) Imperial Valley, California

We provide quality, professional geothermal power plant design and construction services that effectively lower our

cost of project development and delivers the lowest cost energy of all generation types.



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• Use Existing Wells for Testing / Precision Well Logging / Geophysical Studies / Well Engineering Phase 1

• JV Structure / Legal / Permitting / Studies / Project Design Pre-Engineering / Detailed Engineering Phase 1

• Production Well / Geology / Engineering, IBHX & Power Plant Consulting / Construction Engineering Phase 2

• IBHX Heat Exchanger Design, Engineering, Fabrication & Installation / Turbodin GenSet/Supportive Equip Phase 2

SERVICES

Design / Engineering

Turnkey Construction & Commissioning

This phase involves building the Power Plant and Deploying the IBHX in the well. The IBHX will require a drilling rig or equipment

capable of lowering the IBHX into the well on site to deploy the sections of the IBHX. The IBHX will be fully tested during this phase.

The Power Plant will be constructed and connected to the IBHX. The secondary fluid cooling system will be built. Post installation

and commissioning of the completed power plant, a series of performance tests will be completed. The plant will be documented

and a full set of As-Built drawings will be provided. Personnel will be trained. Finally, upon receipt of all government and regulatory

approvals, the plant wil be placed into service.

We design and engineer each power plant to achieve the maximum power output from each well. Each well will be engineered to

produce 30MWe gross electric power. In Phase 1 we will confirm the resource first by either re-logging existing wells or drilling

new confirmation wells. After well log analysis, we will engineer the production well to maximize total well efficiency. The IBHX

extracts thermal energy using a closed loop system of (HEX) working fluid. Finally, we have an option to design our generator cooling

infrastructure to utilize pre-cooling water if available and to produce fresh and pure condensate water for other use or sale if so

desired.

We recommend drilling new, deeper test / confirmation wells engineered to our specifications. We recommend Herrenecht Vertical

drilling equipment be used and have requested a quote for a drilling rig for deployment in the Imperial Valley. Acquisition of the

drilling rig should be considered. We will drill production wells to meet or exceed the proposed 30MWe power production estimate.

• Interconnection Study / Substation Engineer/Construct 115kV/230kV / Transmission Interconnect 230kV Phase 2

• Generator Substation 6kV/115kV / Steel Foundation Installation / Control Rm./Gen Shelter Building Phase 2

• Power Plant & Cooling System Construction / Phase 2

• Interconnection, Transmission , Substation, SCADA / Thermal Infrastructure Phase 3

• Commissioning and Testing of Turn Key Power Plant Phase 4


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1. Project Preliminary Design and Project Proposal – (pre contract acceptance)

a. Research available land and subsurface rights for land lease from select land owners in Imperial Valley

b. Provide the initial draft of this Technical and Commercial Report for seed capital and finance consideration

c. Upon proposal acceptance, prepare project structure and contracts:

i. Joint Venture Structure / Finance Agreements

ii. Supplier

iii. Sub Contractor

2. Geothermal Well Engineering – (post contract execution)

a. If Decided, drill a new test / confirmation well and log with HPHT logging probes. Otherwise re-log any existing wells

b. Analyze well report and well log results to determine true viability of proposed production well (Geothermex)

c. Conduct new site evaluation

d. Utilize new site evaluation to prepare proposal revisions for finance consideration and selection of provided updated options

PROJECT DETAILS

Preliminary Work Scope (Example For Discussion Purposes)

Contract Acceptance and Execution

Phase 1

Phase 2

Detailed Power Plant Design and Enginnering

3. Power Plant Engineering – a. Review and acceptance of proposal revisions

b. Upon acceptance and execution of proposal revisions, power plant project engineering will commence

c. Develop detailed project plan and timeline

d. Generate drawing sets for the project site based on proposal option(s) selections including but not limited to:

i. Civil

ii. Structural

iii. Mechanical

iv. Electrical

v. Plumbing

Phase 2



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4. Procurement –a. Contractor will procure all necessary and required equipment to provide a turnkey fully functioning project as specified

within the project contract

5. Construction –

a. Contractor will provide all necessary skilled trades and equipment to construct, assemble and install required components to

provide a completed project as specified within the project contract

6. Commissioning/Training –

a. Contractor will fully test and commission the functionality of the completed contracted project

b. Commissioning documentation will be provided for O&M and records

c. Contractor will provide training for O&M personnel concerning the Operations and Maintenance for all the above grade

equipment including monitoring systems

PROJECT DETAILS

Equipment Procurement and Construction

Project Completion, Commissioning and Acceptance

Phase 2

Phase 3

Operations and Maintenance Phase 4

7. Operations and Maintenance – a. Contractor will present a proposal concerning the proper Operations and Maintenance of the power plant

b. Operations and Maintenance Contract is a separate Contract to be signed between the Contractor and the JV after the turnkey

contract is signed

c. The IBHX heat exchanger is recommended to be maintained by the Contractor or the Contractor’s approved entity due to the

sensitive nature of the intellectual property and the patented proprietary anti-scaling coating

d. Quality Warranty period of the Contract is 2 years after the successful commissioning of the power plant


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PROJECT LOCATION

The project location is depicted on the following satellite images of the Imperial Valley.



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LAND MAPS


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EXISTING PLANTSExisting Imperial Valley Geothermal Power PlantsOne of the most studied and productive geothermal resources in the world

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Geothermal ProjectsSources: IC Assessors, IC Planning Dept., Aerial: NAIP 2010. created by IC Planning Dept., DN

Updated: March 12, 2013

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Figure 2: Imperial County Geothermal Wells.



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TURBODEN TECHNOLOGY

Turboden ORC (Organic Rankine Cycle) turbine generators are

our current design choice for power generation. Our typical plant

configuration will use evaporative cooling towers to condense

the turbine working fluid and cool the turbo generators. As an

option, we can capture pure condensed water for bottling or bulk

transport to be used for other needs such as bottled drinking

water or for agriculture irrigation. This is a design consideration

that can be discussed as the project moves to the engineering

phase.

Turboden turbo generators are designed to generate electric

power efficiently from medium-to-low-enthalpy geothermal

sources of 100°C and 400°C (212°F and 752°F).

The Imperial Valley indicates temperatures at depths as shallow

as 450m of more than 300°C thus exceeding the minimum

heat required for the generators. Our target heat signature for

a 30MWe power plant is 290°C - 400°C. Clearly this area, as is

indicated by data on existing wells, sufficiently exceeds our

minimum requirements.

The power plant design employs a dual closed loop working

fluid system. The primary loop located in the IBHX extracts

heat from the earth and transports the heat to the Turboden

evaporator within the Turboden turbo generators. The working fluids are pumped and therefore down hole pressures and flow rates are not relevant to the design of the well.

Optimum heat flow and heat transfer will be attained via

optimization of the pumping flow rate to balance the heat

extraction within the IBHX and the exchange rate of the

secondary fluid. The performance of the turbo generators

will be settled at approximately 60% duty cycle so as not to

create unnecessary wear and tear on them and thus increase

O&M costs.

The chemistry of the working fluids is designed to work with

the temperatures that are present in the finished wells. The

IBHX and the working fluid circulating through the well will

deliver heat to the Turboden evaporator at a temperature

sufficient to drive the turbo generators. Excess heat will be

recycled by pumping it back down the well. The formation

does not need to reheat a cold fluid as is required by the hot

rock formation when the cooled water is injected back into

the formation in a conventional binary geothermal system.

This efficient use and reuse of heat drives the efficiency of the power plant.

Proposed Power Plant Design Dual Closed Loop Working Fluid Systems


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TECHNOLOGY

Project Cost Savings from Previous Designs

We reduce power plant complexity as well as cost through

the elimination of multipe production and injection wells. We

further reduce complexity and improve overall plant aesthetics

by eliminating the pipe runs between the many production wells

and the injection wells typically deployed in binary ORC plants.

Our power plant design is modular. We only require two and one

half (2.5) acres to accommodate a production well including the

turbo generator power plant. It follows then, that if injection

wells are unnecessary, steam fields are not needed as well. We

do not require the use of ground water or brine for the operation

of the plant. There is no need to pump the brine to the surface

and then inject it back into the resevoir.

Proposed Well Bore and IBHX Engineering

The proposed bore of the hole is recommended at sixteen (16”)

inches. We will likely spud in with a thirty (30”) inch bore for the

geologist recommended surface depth and run and cement a

twenty-six (26”) inch surface casing. We would follow the surface

casing with a twenty (20) inch anchor casing in a twenty-four

(24) inch hole. The remainder of the well will be drilled with

a twenty (20”) inch bore and will be left open hole for the

insertion of the sisteen (16) inch IBHX. Brine or water in the well

is an important conductive component and it’s exact chemistry

will be analyzed.

Water Chemistry and IBHX Coating

The chemistry of the water, brine or steam in the well is

important to the design and engineering of the IBHX. The IBHX

must be coated with a proprietary coating designed specifically

for the well fluid chemistry. The coating will counteract the

specific minerals in the brine and cause it to reduce the buildup

of those minerals and reduce significantly, scale deposits on the

IBHX. The benefits are:

• Maintain Optimum Heat Extraction Performance

• Increase IBHX Operating Efficiency

• Reduce O&M Cost and Maintenance Intervals

Performance and Risk Management Insurance

It is recommended that the project carry an insurance policy that

is underwritten to take into consideration the risks associated

with the development of geothermal projects. In addition,

the underwriters have a deep knowledge of the IBHX and it’s

operational capabilities. Thus, they are willing to write the

policy to cover the general liability but also to guarantee the

performance of the system. This financial risk mitigation is very

important to investors and the developer alike. The project

will perform as designed and to expectations or the investor

will be reimbursed. Of course, we have every expectation that

the proposed power plant will meet but more likely exceed

expectations so the insurance is a financial buffer to assure

the investors and other invested parties that the nascent IBHX

technology is sound and guaranteed. See Figure 1 opposite page.

“For the Project and subsequent Operations, Aon will provide a

comprehensive insurance program which will protect all assets, revenue,

and liabilities of the corporation. This will be synchronized with the

other components of the Risk Program, where risks have been addressed

contractually and through mitigation.”

Drilling and Logging

The production well will be engineered to accommodate a

sixteen (16) inch IBHX. This is a very large piece of equipment

and the precision of the well is extremely important for both the

initial insertion of the IBHX but also the extraction of the IBHX

for maintenance cycles that are estimated to occur every five (5)

years.

Our drilling partner utilizes semi-automatic hydraulic drilling

rigs that are capable of drilling to depths of five thousand

(5,000) meters. The quality of the well bores are exceptional. In

turn, the well report and well logs that are obtained from these

precision bores are accurate and precise.

The rigs are capable of drilling High Pressure, High Temperature

(HPHT) wells in active geothermal resource areas. Likewise, our

well log partner, Schlumberger / Geothermex has the tools and

the experience logging HPHT wells in all geothermal resource

areas worldwide.

Accurate temperature readings and brine chemistry are perhaps the most important engineering input to the design of the IBHX.



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Figure 1: Schematic of traditional geothermal power generation

of the heat used in the secondary heat exchanger. Existing well

temperatures in the area exceed 300°C at accessable depths.

This means the IBHX outlet temperature could reach 300°C or

more and that the IBHX working fluid would enter the Turboden

evaporator at a temperature in excess of 300°C. For a 30mw

gross power facility, the Turboden turbo generator would use

135°C or 44% of the heat from the IBHX to flash expand the

Turboden working fluid. Turboden’s efficient use of heat does

not require much thermal energy. The IBHX working fluid is

then returned directly to the well via the IBHX at a temperature

of 180°C. The geothermal formation only needs to reheat the

working fluid by 135°C or the delta of the energy used.

The IBHX captures heat the entire length of the heat producing

formation so raising the temperature from 180°C to 315°C is

quick and efficient. This conservative use of the available heat

and subsequent “recycling” of the remaining heat in the IBHX

working fluid yields 3x to 4x more thermal energy and is the

differentiating factor between the two types of system designs.

In contrast, the Enhanced Geothermal binary plant design

uses the natural fluid in the well. It is passed through a heat

exchanger on the surface and a working fluid is heated just as

with the IBHX. However, whether it is water, steam or brine, there

Following is a comparison of our IBHX heat extraction

technology with conventional binary geothermal which is

deployed extensively in the Salton Sea area.

A typical hydrothermal steam field design might recommend

drilling five or more production wells and three or four injection

wells. Our IBHX can achieve the same results with one well and

exceed expectations with two production wells and no injection

wells.

The IBHX is designed and engineered to the specific conditions

of each well. Regardless of well characteristics, the IBHX is a

heat exchanger. It operates using a closed-loop organic working

fluid. It’s only function is to extract heat from the formation

and transfer that heat to the turbo generator’s working fluid.

Similarly, in a nuclear power plant, the only purpose of the

nuclear reactor and reactor vessel is to heat a working fluid in a

closed loop. In both these cases, the super-heated working fluid

is then pumped through a secondary heat exchanger. In the case

of the IBHX, this occurs on the surface in the Evaporator of the

Turboden turbo generator. A small amount of heat (~25% - ~45%)

is exchanged in this stage. The hot working fluid still retaining

~55% to ~75% of the heat is returned to the well.

Following the laws of thermodynamics, the working fluid that

is returned to the well only needs to be reheated by the delta

IBHX Technology - Summary Discussion

Figure 2: Schematic of IBHX geothermal power generation

IBHX FUNCTION


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are inherent deficiencies and risks when using the natural fluid

in this way...

• Heat extraction is limited to where the formation is

producing

• Mineral content that is potentially harmful can build up

scale within the surface heat exchanger, increasing O&M

costs

• As scale builds up performance and efficiency decline

• Insufficient pressure and/or brine flow severely limit the

amount of energy that can be produced

• The heat carrying capacity of the water, steam or brine is

lower than that of a specialized organic working fluid

• Excess heat, ~60% to ~80% is injected far from the

borehole and is wasted. It has to reheat as it flows back to

the well

Specific details regarding the existing project, to the extent they

are currently unknown, will be added here.

IBHX Technology - Summary Discussion

IBHX FUNCTION



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Heat Exchanger DiscussionDue to the proprietary nature of the IBHX, we would like to

discuss the efficiency and effectiveness of heat exchangers in

general. In this Appendix A, we present formulas and potential

mathematical models that are presented in a research paper

entitled “Effectiveness-NTU Computation with a Mathematical

Model for Cross-Flow Heat Exchangers“ by H. A. Navarro and L.

C. Cabezas-Gómez and can be used to simulate the anticipated

performance of the IBHX. Clearly, assumptions must be made

such as the in-bore well temperature is constant and the fluid

used in the IBHX is a fluid capable of delivering the heat to the

ORC. This may not be a perfect example but it is very close.

Nomenclature

Area of heat exchange [ m2 ]

Capacity rate [ kJ/(sK) ]

Specific heat [ kJ/(kgK ]

Capacity rate of a minimum fluid [ kJ/(sK) ]

Capacity rate of a maximum fluid [ kJ/(sK) ]

Capacity rate ratio

EES Engineering Equation Solver

Subscript for gas

Enthalpy [ kJ/kg ]

Subscript for liquid

Mass flow [ kg/s ]

Number of Transfer Units

Number of Transfer Units

Opening ratio of a control valve [ % ]

Pressure [ bar-a ]

Heat transferred [ kW ]

Condenser heat transfer [ kWth, MWth ]

Entropy [ kJ/(kg•K) ]

Temperature [ °C, K ]

Overall heat transfer coefficient [ W/(m2•K) ]

Specific volume [ m3/kg ]

Volumetric flow [ l/s ]

Work per unit time [ kW ]

Electric power output [ kW ]

Isentropic power output [kW ]

Steam quality

Greek Symbols

Heat exchanger effectiveness

Efficiency

Base efficiency

Generator efficiency

Mechanical efficiency

Combined mechanical and generator efficiency

Isentropic efficiency

Definitions

Effectiveness, , is defined as the ratio of the actual heat

transfer rate for a heat exchanger to the maximum possible heat

transfer rate, namely,

In general, it is possible to express effectiveness as a function of

the number of transfer units, NTU; the heat capacity rate ratio,

C*; and the flow arrangement in the heat exchanger,

with the dimensionless number of transfer units (NTU) that is

used for heat exchanger analysis and is defined as

and the dimensionless heat capacity rate ratio

where / is equal to / or / , depending on

the relative magnitudes of the hot and cold fluid heat capacity

rates.

For further information, this paper is available upon request.

APPENDIX A


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Geothermal ORC Power Plant Cycle

This discussion is credited to Árni Jakob Ólafsson and is

extracted from his Masters of Mechanical Engineering

Thesis entitled “Verification of design models for geothermal

power plants”... Faculty of Industrial Engineering, Mechanical

Engineering and Computer Science School of Engineering and

Natural Sciences, University of Iceland, Reykjavik, August 2014

Geothermal power plant operation cycles follow the basic laws

of thermodynamics, mainly the conservation of energy. The

conservation of mass is also important when analyzing these

cycles.

The most important parameters when considering these working

cycles are the following fluid properties:

• Pressure, , is a design parameter with the unit Pa or bar.

Bar and bar-a are often used in the geothermal industry.

The absolute pressure in bar-a is used in these formulas

• Temperature, , is often a constraint in the form

of minimum temperature, maximum temperature or

temperature difference. The unit is °C or K. We primarily use

the unit °C

• Enthalpy, , describes the energy content of a unit mass of

flowing fluid. The unit is kJ/kg

• Entropy, , describes the disorder of a unit mass of fluid.

The unit is kJ/(kgK)

• Specific volume, , is the ratio of a fluids volume to

it’s mass. The unit is m3/kg. Specific volume is used to

determine flow speed of a fluid through pipelines from

mass flow and diameter.

In the operation cycle, the working fluid undergoes phase

changes. Generally, there will exist a liquid phase, a gas phase

and often a two phase mixture of liquid and gas at some point in

the cycle. The steam quality of the gas phase in the two phase

mixture is defined as:

where denotes mass flow and the subscripts and

denote the properties of liquid and gas respectively. Similarly,

steam wetness or water quality is the mass fraction of water in

the steam and equals .

The enthalpy, entropy and specific volume of the mixture are

described by:

When working with a single phase pure fluid, two fluid

properties must be known to calculate the rest. In the case of a

two phase pure fluid, two fluid properties must also be known,

but the steam quality can be one of them (Pálsson 2012).

In a geothermal power plant working cycle, different

thermodynamic processes occur in various components of the

plant. These processes are assumed to be ideal i.e., neglecting

losses. This provides a good estimation of what occurs in a given

component. The most notable processes used when analyzing

geothermal power plant working cycles are:

• Isenthalpic processes, where the enthalpy, , is considered

a constant over a given component.

• Isobaric processes, where the pressure, , is considered a

constant over a given component

• Isentropic processes, where the entropy, , is considered a

constant over a given component

• Heat transfer, where heat is transferred to or from the fluid

over a given component but no work is transferred

The mass flow into a component must be equal to the mass flow

out of the component, that is

A fluid with enthalpy , and mass flow , has an energy

content equal to and the first law of thermodynamics

states that energy that enters a component must be equal to

the energy exiting the component. Therefore where denotes

the work done per unit time by the fluid passing through the

component or work applied to the fluid and

THERMODYNAMICS



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Figure 3: Schematic of ORC Mathematical Model

simulate these processes. This proposal contains data provided

by Turboden and their modeling of their ORC system using the

inlet and outlet temperatures we provided. We still need to

model and simulate the geothermal formation as well as the

IBHX within the formation. This work will be performed after

we drill a new test well and obtain more accurate well data and

geophysical studies specific to our needs.

Again, this is a sensitive area as the IBHX remains proprietary.

However, in general terms, we could model based on the

constant heat source of the formation from the AK-1D well

report (prior to drilling a new test well) and the given geology

and geophysics with a generic cross flow heat exchanger. This

would give a close approximation of the long term potential of

the IBHX performance and the geothermal heat source.

Below is a sample model of a generic ORC process. It’s input is

a constant temperature for modeling from generic heat sources.

Theoretically then, with a constant temperature delivered by the

IBHX, this model would simulate the power capacity of the ORC.

Likewise, a sufficiently close model of a heat exchanger with a

constant source of heat from the geothermal formation, would

simulate the delivery of the constant heat input to the ORC

model.

These studies are ongoing.

denotes the heat transferred from the fluid to the

surroundings or to the fluid from the surroundings .

Equations and

hold for all components in steady processes and can

consequently be used to determine unknown properties in the

analysis of the process in question (Pálsson 2012).

Thermal efficiency , of a process, is a measure of the process

quality and is defined as the ratio between the work output and

the heat flow into the process. That is:

Isentropic efficiency , measures a process quality compared

to the theoretical maximum performance of an ideal, reversible

process where no losses occur, or:

denotes the actual power output of the turbine and

and denote the turbines power output and outlet enthalpy

respectively, assuming the process ideal.

Power Plant Modeling & Simulation

The Organic Rankine Cycle (ORC) is modeled independent

of the heat source. This allows for heat input from different

sources such as boilers, heat recovery in industrial applications,

geothermal, etc to be modeled more accurately on their own.

The ORC can operate at low temperatures and is very efficient in

it’s use of available heat. The principal operates on the basis of

phase change in organic fluids.

Implementation of the Turboden ORC with our IBHX is based

on dual closed loop fluid systems. The Turboden ORC will use

the most effective thermal fluid for fast flashing to steam in the

expander while our IBHX will use the most effective fluid for

delivering the heat it recovers from the geothermal formation

into the turbo generator flash expander.

We are working on a series of mathematical models that will

MODELING


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IBHX Geothermal Well Engineering

This discussion is based on information obtained from the

“Report on Geothermal Drilling” by P Dumas (EGEC), M Antics

(GPC IP), P Ungemach (GPC IP) and published by GEOELEC,

http://www.geoelec.eu/. This report was funded in part by the

Intelligent Energy Europe Programme of the European Union.

This research was prepared for the European geothermal market

but there is good information that applies to other areas of the

world including their database of worldwide drilling companies.

In addition, they discuss well engineering, deep drilling and

present “best practices” for well engineering. This is what we

would like to expand upon regarding the IBHX.

The authors state in their Introduction that “Drilling represents

from 30% to 50% of the cost of a hydrothermal geothermal

electricity project and more than half of the total cost of

Enhanced Geothermal Systems (EGS). This Geoelec report aims

at presenting proposals to overcome this substantial financial

barrier. “

Our IBHX directly addresses these high drilling and development

costs by eliminating much of the engineering required to

develop a steam field to support hydrothermal geothermal and

EGS. While we don’t eliminate drilling, we do eliminate the need

to drill several production wells and injection wells for one

project. Our approach is one production well per turbo generator

system without the need for injection well. We maximize the

extraction of thermal energy while minimizing the complexity

and cost associated with many production wells.

They go on to say, “Research and Development (R&D) can

improve geothermal drilling technologies in order to reduce

its costs, but the main challenge today is to improve market

conditions for geothermal deep drilling.”

True, there are big advancements in drilling technology in the

oil and gas industry. We have chosen to align ourselves with

Herrenecht Vertical, a German manufacturer of fully hydraulic

and semi automatic deep drilling rigs. Our reasons are many.

Due to the precision of the drilling rig, the drilling operation

yields a very clean bore. This provides us with better log data

and allows us to make better decisions when we engineer the

IBHX for the well.

Since the IBHX is the critical component to the success of a

project, we believe it is very important to drill the highest quality

well for the IBHX. Not only will the IBHX perform better in a well

that is engineered for it but it will be much easier to maintain in

the future when it will be removed for inspection and cleaning

during normal O&M cycles.

The IBHX performance is directly related to its exposure in the

well. On wells we engineer and drill, we specify a 20” bore from

the surface to the bottom of the hole. This will generally require

a spud in of 30” and a surface casing to be set and cemented

to a depth specified by the geophysics of the location and local

code. Below the surface casing, we drill the 20” bore as open

hole so that the IBHX has direct exposure to the brine or fluids

in the well. The IBHX is not cemented in place but rather it is

suspended in the well. This allows us to remove it for O&M in

the future.

Best Practice Handbook

The formation and reservoir conditions that characterize

geothermal systems require the adoption of drilling practices

that differ from those utilized in conventional oil, gas, and water

well drilling operations. Temperature, Geology, and Geochemistry

are the principal areas of difference.

Here, we outline typical geothermal drilling conditions, and

the drilling practices that have been developed to optimize the

drilling processes in these conditions.

Introduction

Although heat from geothermal sources has been used by

mankind from the earliest days – for cooking and bathing, for

instance – its major development has taken place during the

past 30 years. This has occurred in parallel with the significant

advances made in deep drilling practices, and it’s importance

has risen dramatically during the last few years as the price

of petroleum has soared, and awareness of the importance of

‘renewable energy’ has developed.

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70° per kilometer. In anomalous regions, the local heat flux and

geothermal gradients may be significantly higher than these

average figures. Such anomalous zones are typically associated

with edges of the continental plates where weakness in the

earth’s crust allow magma to approach the surface, and are

associated with geologically recent volcanism and earthquakes.

It is in such settings that the majority of geothermal resources

are found and that the majority of geothermal wells have been

drilled.

While a few wells have been drilled into temperature conditions

that approach the critical point of water (374°C) and a number

of fields produce dry and superheated steam, the majority of

higher enthalpy resources are two phase – either vapor or water

dominated, with temperature and pressure conditions controlled

by the saturated steam / water relationship – ‘boiling point for

depth’. For design purposes, where downhole pressures and

temperatures are not known, ‘boiling point for depth’ (BPD)

conditions are assumed from ground level as indicated in Figure

4.

Saturated steam has a maximum enthalpy at 235°C and

consequently many geothermal fields are found to exist at

temperatures approximating this value (dissolved solids and

gases change this value somewhat). Such elevated formation

temperatures reduce drill bit and drilling jar performance and

often precludes the use of mud motors and directional MWD

instrumentation equipment; it adversely effects drilling fluid

and cementing slurry properties; and reduces the performance

of blow out prevention equipment. In addition it significantly

increases the potential for reservoir fluid flashing to steam

resulting in flowback or blowout from shallow depths.

The well, the downhole well components and the near well

formations are subject to large temperature changes both

during the drilling process and at the completion of drilling.

The circulation or injection of large volumes of drilling fluid

cools the well and the near well formation, but as soon as

fluid circulation is ceased, rapid re-heating occurs. These large

temperature differentials require special precautions to be

taken:

• to avoid entrapment of liquids between casing strings –

The equipment and techniques used in the drilling of

geothermal wells have many similarities with those used in

exploring and exploiting petroleum reservoirs. However, the

elevated temperatures encountered; the often highly fractured,

faulted, and permeable volcanic and sedimentary rocks which

must be drilled; and the geothermal fluids which may contain

varying concentrations of dissolved solids and gases have

required the introduction of specialized drilling practices and

techniques.

Temperature

The temperature of the earth’s crust increases gradually with

depth with a thermal gradient that usually ranges from 5° to

Figure 4: Downhole fluid conditions - BPD

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Particularly in the volcanic geothermal systems, many of the

shallow formations comprise low bulk density materials such

as ashes, tuffs and breccias, which as well as being permeable,

are often unconsolidated and friable, and exhibit a low fracture

gradient, and thus provide low resistance to blowouts.

Geochemistry

Geothermal fluids contain varying concentrations of dissolved

solids and gases. The dissolved solids and gases often provide

highly acidic and corrosive fluids and may induce scaling during

well operations. Dissolved gases are normally dominated by CO2

but can also contain significant quantities of H2S, both of which

can provide a high risk to personnel and induce failure in drilling

tools, casings and wellhead equipment.

The presence of these dissolved solids and gases in the

formation and reservoir fluids imposes specific design

constraints on casing materials, wellhead equipment and casing

cement slurry designs.

Drilling practices

In general, the drilling processes and equipment utilized to

drill deep geothermal wells are substantially similar to those

developed for petroleum and water well rotary drilling. However,

the downhole conditions experienced in geothermal systems, as

described above, require some significantly different practices to

be adopted. Some of these differences are outlined below.

Well design

The thermal efficiency of converting geothermal steam/water to

electricity is not particularly high (±20%), therefore large mass

flows and therefore volume flowrates are required, particularly

in vapor dominated systems. These large volume flowrate

requirements necessitate large diameter production casings and

liners. Typically a ‘standard’ sized well will utilize standard API 9

5/8” diameter casing as production casing and either 7” or 7 5/8”

diameter slotted liner in an 8½” diameter open hole section.

A “Large” diameter well will typically utilize standard API 133/8”

diameter casing as the production casing, with either 95/8” or

10¾” diameter slotted liner in a 12¼” diameter open hole.

which can exert extreme pressure when heated resulting in

collapsed casing.

• to ensure casing grade and weight, and connection type

is adequate for the extreme compressive forces caused by

thermal expansion.

• to ensure the casings are completely cemented such that

thermal stress are uniformly distributed.

• to ensure casing cement slurry is designed to allow for

adequate setting times and to prevent thermal degradation.

Geology

Geothermal fields occur in a wide variety of geological

environments and rock types. The hot water geothermal fields

about the Pacific basin are predominantly rhyolitic or andesitic

volcanism, whereas the widespread hydrothermal activity in

Iceland occurs in extensively fractured and predominantly

basaltic rocks. In contrast the Larderello steam fields in Italy are

in a region of metamorphic rocks, and the Geysers steamfield in

California is largely in fractured greywacke.

The one common denominator of all of these fields is the highly

permeable, fractured and faulted nature of the formations in

which the reservoirs reside. This high permeability is one of

the fundamental and requisite components for any geothermal

system to exist.

Typically, the permeable nature of the formations is not limited

to the geothermal reservoir structure alone, but occurs in much

of the shallower and overlying material as well. In addition,

a characteristic of most of these geothermal systems is that

the static reservoir fluid pressures are less than those exerted

by a column of cold water from the surface – the systems are

“under-pressured”. The high temperatures of the systems result

in reservoir fluid densities which are less than that of cold

water, and the majority of geothermal systems are located in

mountainous and elevated situations – resulting in static water

levels often hundreds of meters below the surface.

Drilling into and through these permeable and “under-pressured”

zones is characterized by frequent and most often total loss of

drilling fluid circulation.

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The depths of all cemented casing strings and liners is

determined such that the casings can safely contain all well

conditions resulting from surface operations and from the

characteristics of the formations and fluids encountered as

drilling proceeds.

Casing shoe depths are determined by analysis of data

from adjacent wells which will include rock characteristics,

temperatures, fluid types and compositions and pressures.

In particular fracture gradient data gathered from nearby wells.

At any time the depth of open hole below a particular casing

shoe should be limited to avoid exposure of the formations

immediately below the casing to pressures which could exceed

the fracture gradient at that depth and hence lead to a blowout.

It is usual to assume worst case scenario’s such as exposing the

previous casing shoe to the saturation steam pressure at the

total drilled depth of that section. Figure 3 illustrates how the

shoe depths may be chosen using a somewhat simplistic and

theoretical model with boiling point for depth fluid pressure

condition from a nominal water level at 200 m depth; and a

uniform formation fracture gradient from the surface to the total

depth of 2400 m.

This simplistic model suggests that the production casing shoe

would need to be set no shallower than 1100m; the anchor

casing shoe at approximately 550 m; an intermediate casing set

at 250 m depth; and a surface casing set at around 40 m depth.

It is likely that with real data that this casing program would be

somewhat simplified, the production and other casings shoes

somewhat shallower, and the intermediate casing eliminated.

Casing diameters

Casing diameters will be dictated by the desired open hole

production diameter – typically either 8½” or 12¼”. Slotted or

perforated liners run into these open hole sections should be

the largest diameter that will allow clear running – there is an

obvious advantage to utilize ‘extreme line’ casing connections

from a diameter point of view, however this is often offset by

reduced connection strength of this type of casing connection.

Casing internal diameters should not be less than 50 mm larger

Casing sizes utilized for the Anchor, Intermediate, Surface and

Conductor casings will be determined by geological and thermal

conditions.

Figure 5 illustrates schematically the casing strings and liner of

a typical geothermal well.

Casing depths

Figure 5: Casing strings and liner for a typical well.

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strength at least equivalent to that of the casing body.

It is usual that a square section thread form is chosen, and this is

typically the API Buttress threaded connection.

Cementation of casings

Unlike oil and gas wells, all of the casings down to the reservoir

are usually run back to the surface, and are fully cemented back

to the surface. The high thermal stresses imposed on the casings

demand uniform cementation over the full casing length, such

that the stress is distributed over the length of the casing as

uniformly as is possible and such that stress concentration is

avoided.

The objective of any casing cementing program is to ensure that

the total length of annulus (both casing to open hole annulus,

and casing to casing annulus) is completely filled with sound

cement that can withstand long term exposure to geothermal

fluids and temperatures.

Of course, as suggested above, the permeable and under-

pressured nature of the formations into which these casings are

being cemented means that circulating a high density cement

slurry with S.G.’s ranging from 1.7 to 1.9, inevitably result in loss

of circulation during the cementing procedure.

The traditional method of mitigating this problem was to

attempt to seal all permeability with cement plugs as drilling

proceeded, however, this is usually an extremely time consuming

process, and more often than not, circulation is still lost during

the casing cementing process.

Many approaches to overcome this problem have been tried, and

include:

• Low density cement slurry additives – pozzalan, perlite,

spherical hollow silicate balls

• Sodium silicate based sealing preflush

• Foamed cement

• Stage cementing

• Tie back casing strings – the casing is run and cemented in

two separate operations.

than the outside diameter of connection collars and accessories,

to allow satisfactory cementing.

A typical well design would include:

• Conductor: – 30” set at a depth of 24 meters, either driven

or drilled and set with a piling augur.

• Surface Casing: - 20” casing set in 26” diameter hole drilled

to 80 meters depth.

• Anchor Casing: - 13 3/8”casing set in a 17½” hole drilled to

270 meters depth.

• Production Casing: - 9 5/8” casing set in a 12¼” hole drilled

to 800 meters depth.

• Open Hole – 7” perforated liner set in 8½” hole drilled to

2400 m –Total Depth.

Casing materials

Steel casing selected from the petroleum industry standard API

Spec. 5CT or 5L.

In general the lowest tensile strength steel grades are utilized to

minimize the possibilities of failure by hydrogen embrittlement

or by sulphide stress corrosion. The preferred API steels are: Spec

5CT Grades H-40, J-55 and K-55, C-75 and L-80; Spec 5L grades A,

B and X42.

In cases where special conditions are encountered, such as

severely corrosive fluids, use of other specialized materials may

be warranted.

Casing connections

The compressive stress imposed on a casing strings undergoing

heating after well completion is extreme. As an example, an

800 meter length of casing undergoing heating from the

cement setup temperature of around 60°C to the final formation

temperature of 210°C ( a change of 150°C), would freely

expand 1.44 m. If uniformly constrained over the full length, the

compressive strength induced would be 360 MPa; the minimum

yield strength of Grade K-55 casing steel is 379 MPa. As this

illustrates, axial strength is critical and it is therefore important

that the casing connection exhibits a compressive (and tensile)

BEST PRACTICES DRILLING



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sections, large diameter

• Blow Out Preventers (BOP’s) are required, however only

moderate pressure rated units are necessary – a typical set

of BOP stacks would include:

º 30” (or 29½”) 500/1000 psi annular diverter and

associated large diameter

º hydraulically controlled diversion valve.

º 21¼” 2000 psi BOP stack including blind and pipe ram

BOP’s and an annular BOP.

º 135/8” 3000 psi BOP stack including blind and pipe ram

BOP’s and an annular BOP.

º (comparatively – oil and gas rigs would usually have

5000 psi and 10000 psi rated BOP’s)

º For aerated drilling 21¼” and 135/8” rotating heads

and a 135/8” ‘Banjo box’ is required.

• The use of a ‘choke manifold’ is not mandatory in

geothermal operations; usually an inner and outer choke

valve is sufficient.

• As the BOP stacks are relatively large and occupy a

significant height above the ground level (in particular

if aerated drilling is to be used) it is necessary that rigs

are equipped with an ‘extra’ height sub structure – a clear

height of at least 6 meters is necessary.

• All of the elastomeric parts of the BOP’s must be high

temperature rated.

• It is preferable, although not mandatory, that rigs are fitted

with top drive units – allowing for drilling with a double or

triple stand of drill pipe; for easy connection and circulation

while tripping the drill string in or out of the hole; and for

back reaming.

• Rig mud pumps – (usually tri-plex) must be capable of

pumping 2000 to 3000 lpm on a continuous basis. Pressure

rating is not as important as pumped volume; pumps must

be fitted with large diameter liners (usually 7” diameter).

• Rig mud pumps must be piped to the rig such that fluid can

Many of these options were tried but generally none have

proven totally successful nor economic.

To date, in the experience of the author, the most successful

procedure has been to utilize the most simple high density

cement slurry blend, and to concentrate on the techniques of 22

placing the cement such that a full return to the surface without

fluid inclusions can be achieved. This nearly always involves a

primary cement job carried out through the casing, and in the

event of a poor or no return and immediate annulus flushing

procedure, which is then followed by an initial backfill cement

job through the casing to casing annulus, with sometimes

repeated top-up cement jobs. Particular care must be taken

to avoid entrapment of any water within the casing to casing

annulus.

Perforated and slotted liner

Unlike the cemented casings discussed above, it is usual to

run a liner within the production section of the well. This liner

is usually perforated or slotted, typically, with the perforation

or slots making up around 6% of the pipe surface area. As it is

extremely difficult to determine exactly where the permeable

zones within the production section lie, it is usual that the entire

liner is made up of perforated pipe.

The liner is not cemented, but either hung from within the

previous cemented production casing, or simply sat upon the

bottom of the hole with the top of the liner some 20 to 40

meters inside the cemented production casing shoe, leaving the

top of the liner free to move with expansion and contraction.

Drilling rig and associated equipment

The drilling rig and associated equipment are typically the same

as is utilized for oil and gas well drilling, however a few special

provision are required.

Because of the large diameter holes and casings utilized in the

surface and intermediate (if used) casing strings, it is important

that the rotary table is as large as practicable – typically a 27½”

diameter rotary table is utilized, and even 37½” is sometimes

seen.

• Again, due to the large hole diameters drilled in the upper



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The upper sections of a well are usually drilled with simple

water based bentonite mud treated with caustic soda to

maintain pH. As drilling proceeds and temperatures increase, the

viscosity of the mud is controlled with the addition of simple

dispersants. If permeability is encountered above the production

casing shoe depth, attempts will be made to seal these losses

with ‘Loss of Circulation Materials’ (LCM), and cement plugs. If

the losses cannot be controlled easily, then the drilling fluid is

switched to either water ‘blind’ – that is drilling with water with

no circulation back to the surface, or to aerated water.

Once the production casing shoe has been run and cemented,

and drilling into the production part of the well commences,

mud is no longer use as drilling fluid as it has the potential to

irreparably damage the permeability and thus the production

potential of the well.

Once permeability is encountered in the production section

of a geothermal well, drilling was traditionally continued with

water, ‘blind’ – with no return of the drilling fluid to the surface.

The drill cuttings are washed into the formation, and periodic

‘sweeps’ with either mud or polymer assists in keeping the hole

cleared of cuttings.

While this method alleviates the impractical and uneconomic

loss of large volumes of mud, and the associated mud damage

to the formation, the build up of cuttings within the hole often

results in stuck drill strings, and the washing of cuttings into the

formation causes damage to the permeability, although not on

the same scale as bentonite mud.

Aerated water is now more commonly utilized for drilling this

section of the well. To enable circulation of drilling fluids to

be continued despite the presence of permeability and ‘under

pressured’ reservoir conditions, the density of the drilling fluid

must be reduced. The addition air to the circulating water allows

a ‘balanced’ downhole pressure condition to be established, and

the return and circulation of the drilling water and cuttings back

to the surface.

Well control

Perhaps one of the most crucial differences between geothermal

and oil and gas drilling operations is the nature of the formation

be pumped to both the rig standpipe and to the kill line

(annulus) at the same time. It is important that the pump

sizes or quantity of pumps is such that sufficient fluid can

be pumped for drilling purposes, while a secondary volume

– say 1000 lpm can be simultaneously pumped to the kill

line.

• The drilling fluid circulating system requires a fluid cooling

unit – often a forced draft direct contact cooling tower, or

chilling unit.

• Drilling water supply must be capable of providing a

continuous supply of at least 2000 lpm and preferable 3000

lpm - backup pumps and often dual pipelines are utilized.

• Drill pipe should be lower tensile strength material to avoid

hydrogen embrittlement and sulphide stress corrosion

– usually API Grade E or G105. Drill pipe is now usually

supplied with a plastic internal lining, it is important that

this lining has a high temperature rating.

• A high temperature rated float valve, (non return valve), is

always fitted immediately above the drill bit in the drill

string to prevent backflow into the drill string which often

results in blocking of the drill bit jets.

• Drill bits – usually tri-cone drill bits are utilized however the

elastomeric parts of the bearing seals and the lubrication

chamber pressure compensation diaphragm are particularly

heat sensitive. It is important that while tripping the drill

string into the hole, that the bit is periodically cooled by

circulating through the drill string.

• PDC – polycrystalline diamond compact drill bits are

now being used more often - initially they were found

to be totally unsuitable for hard fractured rock drilling –

improvements in materials are now making this type of bit

a real option. With no moving parts, bearings and seals they

are essentially impervious to temperature.

• Drilling tools – the high downhole temperatures limit use

of mud motors and MWD instrumentation tools to the upper

cooler sections of the hole.

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quenched. Neither option a very satisfactory situation – it is

crucial that a full understanding of the behavior of the reservoir

and the necessary quench volumes that are required to maintain

the well in a fully controlled state.

The reliability of the water supply system for this process is of

paramount importance.

fluids and how they can be controlled.

A geothermal well has the potential of being filled with a

column of water at boiling point – even the slightest reduction

in pressure on that column can cause part of, or the entire

column to boil and flash to steam. This process can occur almost

instantaneously. The potential for ‘steam kick’ is always there and

requires special drilling crew training and attention.

While the likelihood of a well kicking at any time is real, the

method of controlling such a kick is simple and effective. Steam

is condensible, so by simply shutting in the BOP’s and pumping

cold water into the well – both down the drilling and down

the annulus, the well can be quickly controlled. The pressures

involved are not high, as they are controlled by the steam /

water saturation conditions.

During such a ‘steam kick’ it is normal that some volume of non-

condensible gas (predominantly CO2) will be evolved. After the

steam fraction has been quenched and cooled, it is usual that

this usually small volume of non-condensible gas be bled from

the well through the choke line. Some H2S gas may be present,

usually in small quantities, so precautions are required.

Running the open-hole liner

One of the final tasks in completing the drilling of a geothermal

well is the running and landing of the perforated or slotted liner.

At this stage the drilling operations have been 25 completed

and hopefully permeability and a productive resource has been

encountered.

This operation is potentially critical as while a string of

perforated or slotted liner (casing) is through the BOP stack,

the functionality of the BOP stack is disabled. It is critical that

a significant volume of quenching water is pumped to the well

prior to and throughout the entire process.

In the event that a kick occurs in this condition, there are only

two options available. A capped blank joint of pipe must be

readily available so that it may be screwed in and run into the

BOP stack so the well may be closed and then quenched. The

alternative is that the liner is released and dropped through

the BOP stack allowing it to then be closed and the well then

APPENDIX A RESEARCH

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109 E 17th St., STE 4423Cheyenne, WY 82001Mailing: 1821 S Bascom Ave., STE 279

Campbell, CA 95008Phone: + 1 408.390.8877https://[email protected]

East Brawley Geothermal Report

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