Making its first move into power generation, Britain’s biggest operator of onshore oilfields Star Energy is buying into Croatia’s potential for geothermal electricity.
Star is committing a total of Euros 1.6 million to acquire a controlling 51% interest of the local parent of IGeoPen, holders of exploration rights granted by Croatia’s government for hot rock extraction under the Pannonian Basin, described by Star as “highly prospective”.
In a complex deal enabled by its own subsidiary and by privately held investment fund Peninsula International, Star and Peninsula are teaming up to bid for, and hopefully deliver on, electricity generation from drilling beneath the Basin.
Star brings its decades of experience in geological analysis, and onshore drilling in the UK for gas & oil.
Via IGeoPen, the partners have submitted three separate bids for geothermal generation to Croatia’s hydrocarbons regulator, as part of its current licencing round. Awards of five-year licences are expected later this year. Depending on their success, Peninsula may receive up to a further €1.5 million from Star.
Croatia estimates its national potential for making electricity from its hot rocks is around 1GW. Only one plant, the 17.5MWe Velika Ciglena station currently generates. But 4,000 exploratory wells, many centred in the 20,000 square kilometres of the Pannonian Basin, buoy the confidence of developers and ministers.
As an EU member, and its national grid connected to ENTSO for international transmission and sales, Croatia sees the Basin as a money spinner for its own coffers and for developers. A temperature gradient 60% higher than in substrata across the rest of Europe favour the nation via its subsurface formations.
A liberalised national generating market, and 12 year contracts for difference smiling on renewable sources of power, add to the nation’s attractiveness.
Via their subsidiary Star and Peninsula already hold one licence with existing wells in situ, centred around the Ernestinovo locality, in the east of the country. One of those wells needs refurbishment and a well test to validate the resource. The pair then expect to receive a 20-year development licence.
Based on preliminary heat reserves and well productivity estimates, Star envisages at first a 10MW generation plant, driven by geothermal brine sourced from up to six wells. The proposed plant would connect into a major substation with 400kV transmission lines to Zagreb, Hungary, Serbia and Bosnia,
Star Energy CEO Chris Hopkinson commented: “We are very pleased to announce our first overseas investment in geothermal as we look to build momentum in this part of our business.
“Whilst the business continues to build a material pipeline of business opportunities in the UK, we identified a significant opportunity in Croatia which will allow faster development and diversification of Star Energy’s geothermal interests.
The Croatian government is actively promoting the sector with a focus on electricity production which should allow accelerated development. The acquisition brings with it a small, but highly respected team with years of experience in Croatia including developing the Velika 1 power plant”.
By lunchtime, investors on the LSE had marked Star’s share price 2.3% lower.