Description:
This paper investigates the economics of steam
production at The Geysers from the point of view
of a field developer. We present a cash-flow
analysis and the calculation of several
profitability criteria for steam supply to a
hypothetical 55 MW (gross) power plant starting
in 1989. This paper assesses in two parts the
economics of developing the steam supply: (1) a
deterministic economic analysis to establish the
sensitivity of the profitability criteria to
steam price where each parameter is given a
unique value, and (2) a probabilistic analysis
to estimate the profitability criteria, and
their sensitivity to steam price, when uncertain
parameters are allowed to vary. The results of
the study indicate that no new commercial
project is economically feasible at The Geysers
unless the steam price exceeds 2 cents/kw'hour,
because of long payout and extremely low
profitability. Only a steam price exceeding 2.7
cents/kw'hour ensures a reasonably short payout
time and the minimum profitability typically
expected by field developers. Above a steam
price of 3 cents/kw'hr, the economics of field
development are attractive and risks are low.
The accelerated decline in well productivity in
recent years has increased risks and reduced
profitability.
