Rodrigo de Vivanco
Deputy CFO
CP Latina
/
Insight

Diversification of Drilling Activities for Geothermal

Wed, 02/19/2014 - 16:17

With an oil and gas industry that dates back over a century, drilling activities are nothing new to Mexico. CP Latina has been involved in this sector since the 1960s, drilling water, and oil and gas wells in the northern part of Mexico before moving to drilling geothermal wells in the 1970s in Baja California and central Mexico. Today the company is still drilling geothermal wells in different parts of the country.

CP Latina has participated in the development of all of Mexico’s geothermal fields, including Cerro Prieto in Baja California, Los Azufres in Michoacan and Los Humeros in Puebla. “We have participated in many bids, with very good results,” says Rodrigo De Vivanco, Deputy CFO of CP Latina. “There are few companies that participate in these bids, but it is important to mention that CP Latina has had a very good success ratio.” Since the geothermal energy industry has experienced slow growth, the company has sought to expand into the oil and gas sector, even though the core of its business has remained drilling geothermal wells. To successfully exploit geothermal resources, which are closely related to tectonic plates, the right conditions must exist in terms of water, porosity and pressure. Even though it is a renewable energy, incorrect exploitation of a geothermal well can cause depletion of the resource, which means that it is of vital importance that geothermal drilling companies have experience in all phases of a project.

Drilling activities in the geothermal sector are very similar to the process that is followed in the drilling of oil and gas wells, barring several small differences. For example, the oil and gas drilling of oil and gas wells requires a flaring tower, while geothermal drilling needs a separation tower to control and clean the steam. “Some tools vary, but in reality the equipment is basically the same,” explains De Vivanco. Despite these similarities, the different market conditions have resulted in the geothermal market remaining small, and depending on only one client, CFE. “Geothermal energy sites are located far away from oil and gas fields and very few companies are willing to move their equipment to geothermal fields. The transportation costs are very high, on top of the costs of setting up a base and other important investments,” says De Vivanco. “Also, the geothermal market in Mexico requires the drilling of very few wells. 40 to 50 wells are drilled per year, each taking about 60 to 70 days to drill, while thousands of wells are drilled in oil fields every year.”

Despite these costs, geothermal technology and market conditions have been improving over time. Today, 3,800m deep wells are being drilled while numerous studies have been carried out to minimize risks. Geothermal wells are built under very specific conditions, but these conditions may vary drastically between two wells that are drilled just 500 meters apart within the same field. To mitigate the risk, it is critical that the equipment is working at maximum efficiency, the drilling process meets all technical parameters, and that enough of an understanding of the terrain is acquired.

CP Latina is also very active in repairing existing wells. “One of our keys to success in the partial field administration project at Cerro Prieto was our ability to drill less while maintaining the same production level. We were able to succeed because we were constantly cleaning and servicing the wells to guarantee greater efficiency, increasing production levels with fewer wells,” tells De Vivanco. Alongside the level of maintenance that all geothermal projects require, the fields themselves can evolve and change through time. Given this lack of predictability, certain issues are bound to affect each well differently, especially given the relatively long lifecycle of geothermal projects.

For the geothermal industry to really pick up, De Vivanco is waiting for government action. “It is important for the government to open tenders on the administration of geothermal projects and on binary cycle projects. It is clear that the legislation should be improved,” says De Vivanco. “CP Latina is not alone in this fight. The geothermal sector in Mexico as a whole has been trying to push these improvements, but since very few companies are currently operating, the lack of a geothermal drilling association has largely limited our actions. We do not have the strength or the opportunity to promote the needed actions to the government.” Due to the slow development of geothermal energy in Mexico, companies like CP Latina have started looking for new opportunities in other developing Latin American markets such as Costa Rica, El Salvador, Guatemala and Chile.

“I do not know if the proportion of geothermal power in Mexico’s energy mix will increase, but if we have this vast resource, why not use it? Geothermal energy may not gain the same importance that hydroelectricity or wind power have, but it could be exploited in a more strategic way,” concludes De Vivanco.