Since the grant of the first Geothermal Exploration Licence (GEL) in Australia in 2001 to the end of February 2007, 16 companies have applied for 121 licence application areas covering ~67,000 km² in Australia.

Most (110, or 91%) of these geothermal licence areas are located in South Australia. To end February 2007, an additional 6 GELs were granted in South Australia, taking the national total to 87 GELs.

Over A$569 million (US$448 million) in work program investment is forecast for the period 2002–12. Approximately A$90 million (US$70 million) of this forecast was invested in the term 2002–06; 99% of which was spent in South Australia. This current forecast (for the term 2002–12) represents an increase of A$159 million (US$125 million) over the forecast stated for year-end 2005. These forecasts exclude capital expenditure associated with demonstration power plants assumed in the Energy Supply Association of Australia's scenario for 6.8% (~5.5 GWe) of Australia's baseload power sourced from geothermal resources by 2030.

This progress follows encouraging geothermal drilling, temperature logging and flow testing programs in South Australia in the term 2004–06, the dissemination of information that publicises the vast potential for Australia's geothermal resources, and the implementation of legislation to clarify investment frameworks to explore for and sell geothermal energy in a number of Australian jurisdictions.

Ten tenements were released for tender in the state of Queensland in December 2006 with a closing date in early April 2007.

Thirty-one gazettal areas were released for tender over the entire state of Victoria in April 2006. At the close of tender in October 2006, 20 applications had been lodged which are now in the process of being accessed. Licence offers are expected to be announced in April 2007.

The map below shows the geothermal licences, applications and gazettal areas as at December 2006 (top map). The bottom map (courtesy of Prame Chopra at the Australian National University) shows extrapolated temerature at 5km interpolated across Australia. The map is based on available (in places sparse) data that may not be a true reflection of geothermal gradients on a regional basis. Research by the Australian National University discusses the data distribution in more detail.

At the close of tender in October 2006, 20 applications had been lodged which are now in the process of being assessed. Licence offers are expected to be announced in April 2007.

The activities of the sixteen Australian geothermal explorers at year-end 2006 are summarised in the attachment Australian Geothermal Licence Holders.

A summary of exploration and proof-of-concept projects that have reached the drilling phase by year-end 2006 is given below. The five projects operated by four companies that have already entered the drilling phase are all located in South Australia and include: Geodynamics Limited’s Habanero project; Petratherm’s Paralana and Callabonna projects; Green Rock Energy’s Blanche Project; and Scopenergy’s project in the southeast of South Australia.

GEODYNAMICS
The most significant advancement in terms of demonstrating the potential of Hot Fractured Rock energy is Geodynamics’ drilling, fracture stimulation and flow testing of two wells that are 500m apart near Innamincka in the Cooper Basin in northeast South Australia: Habanero 1 (Total Depth: 4421m) and Habanero 2 (Total Depth: 4357m). The Habanero Project was the first and remains the most advanced Hot Rock ‘proof of concept' project in Australia. Flow of geothermally heated formation waters (20 000 ppm Total Dissolved Solids) at a maximum rate of 25 litres/second to surface at (up to) 210ºC was achieved in 2005. The geothermal reservoir is a water-saturated, naturally fractured basement granite (250ºC at 4,300 metres as reported by the Operator) with permeability that was effectively enhanced with fracture stimulation.

Two fractured reservoir zones are present in the Habanero wells: an upper less permeable zone at 4200m; and a lower more permeable zone below 4,300m. An obstruction in Habanero 2 (the intended production well) interfered with a planned flow test of the main fractured reservoir below 4300m while the lessproductive upper fractured reservoir zone at 4,200m remains accessible. To conclude a circulation test of the main fracture zone, Geodynamics drilled a sidetrack borehole around the blockage in Habanero 2. The sidetrack progressed to a depth 100m above the target reservoir when the drill bit became stuck. Attempts to conclude drilling operations in the Habanero 2 sidetrack were abandoned in June 2006.

Geodynamics now plans to drill Habanero 3 in 2007. Habanero 3 will have an 8 ½ inch open hole section over target reservoirs (compared to 6 inch for Habanero 2). Following the drilling of Habanero 3, a flow test with tracer injection between Habanero 1 (the intended injection well) and Habanero 3 (the intended production well) is planned as a further step towards demonstrating commercial viability.

The horizontal extension of stimulated reservoirs at the Cooper Basin site lends itself to multi-well
developments. Geodynamics’ HOTROCK 40 project entails a 7-well, 40 MWe power station. The 7 wells include 3 injection wells and 4 production wells up to 1km apart. This will be an important milestone for the demonstration of EGS from Hot Fractured Rock in Australia and a stepping stone towards commercialising vast renewable and emissions-free baseload geothermal energy supplies to meet Australia’s future energy requirements. Geodynamics believes that a successful test between Habanero 1 and 3 will lead to large-scale development of an area of more than 1000 km² where rock temperatures, stress conditions and rock properties are extensive and favourable for geothermal energy production.

PETRATHERM
Petratherm has drilled two wells to establish thermal gradients down to about 600 metres above
exceptionally high heat producing granites in South Australia. Results from both wells were encouraging, with the Callabonna and Paralana sites respectively exhibiting 68 and 81°C/ km thermal gradients. In June 2006, the phase-2 drilling program at Paralana was successfully completed with the geothermal test well being extended to 1807 metres. Temperature logging of the well suggests a world class thermal resource is located at Paralana, with extrapolations indicating 200 oC can be expected at a depth of 3.6 km above basement granites, within insulating strata susceptible to fracture stimulation. Petratherm refers to this play concept as heat exchange within insulator (HEWI).

Petratherm next plans to drill and fracture stimulate its first injection well at Paralana to approximately 3.6 kilometres depth and then drill and fracture stimulate a second well. The company then plans to create an underground HEWI system with the circulation of water between the two Paralana project wells to demonstrate 'hot rock' energy production from an initial small scale power plant to supply up to 7.5 MW to a growing electricity market 10 km away at the Beverley Uranium Mine. This plan is the subject of a Memorandum of Understanding between Petratherm and the owners of the Beverley Mine, Heathgate Resources.

GREEN ROCK ENERGY
Green Rock drilled Blanche No 1 to 1935 metres (718 metres of sediments and 1216 metres of
homogenous hot granite) 8 km from the giant Olympic Dam mine in South Australia in 2005. The target granite is interpreted to persist to depths of 6000 metres over an area of about 400 km² and represents a potential geothermal resource in excess of 1000 MWe. Cores and wireline logs from Blanche No 1 suggested natural fractures exist. Owing to lack of availability of a suitable drilling rig, Green Rock deferred the drilling of at least one deep well to establish the basis for flow tests in 2006. The company now hopes to secure a rig in late 2007.

SCOPENERGY
In the first quarter of 2006, Scopenergy drilled 3 slim-hole wells near Millicent and Beachport in southeast South Australia to determine geothermal gradients and confirm several large scale heat flow anomalies previously measured in 19 petroleum exploration wells and 26 water wells in the vicinity of its tenements.

In mid 2006 the company completed temperature logging of its 3 wells: Heatflow 1A, 3A and 4. Poor recovery of core samples from unconsolidated sediments and highly variable lithology affected the reliability of thermal conductivity measurements and hence, estimates of heat flow. Scopenergy is now considering whether to undertake a 3D seismic program to better define drilling targets prior to drilling its first production scale hole to reservoir depth.