From the "Business Spectator" an article on Panax's Well in SA -...

From the "Business Spectator" an article on Panax's Well in SA - hopefully augers well for an increase in SP for all geothermal companies.

"A clean energy source feels the heat

Has a cloud of steam ever generated as much excitement as the vaporised water that emerged from the Panax Geothermals Salamander well in South Australia last Thursday?

Those are beautiful pictures, said one geothermal company executive as photos were distributed by Panax in its announcement to the ASX. It will warm the cockles of the hearts of all the geothermal energy producers.

The geothermal industry has been having a tough time of late. A technology with pretensions to displace the fossil-fuel energy industry finds itself at its lowest ebb: an unexplained end to government funding, a lack of interest from institutional and other investors, delays in drilling programs and technical problems at Geodynamic have combined to send the share prices of most listed geothermal companies to one or two year lows.

Worse than that, it has shaken the conviction of many that geothermal can deliver on its promise of relatively cheap, emissions free baseload energy that could power Australias energy many times over if just one per cent of its resources are tapped.

Which is why all eyes are focused on the results of drilling at the Salamander well. The significance of the steam, says Panax CEO Bertus de Graaf, is that it is proof that the company has found a reservoir of energy, the first in a hot sedimentary aquifer in Australia. What we dont know yet is the quality of the reservoir, de Graaf says.

That will not be known until the results of extensive flow tests are released in mid-May. That will indicate the poracity of the superheated aquifer that lies some 4kms beneath the surface, and if the resource is economic or not. Were still waiting for that last piece of the puzzle, says Wilson HTM analyst Jenny Cosgrove, who follows the geothermal industry as closely as anyone.

If the flow test is good, it will be the best piece of news the industry has received since many of its stocks soared in a burst of investor enthusiasm nearly two years ago, when it was thought that geothermal could provide a near term solution to the challenge of guiding Australia to a low carbon economy.

That thinking has now modified, even if the enthusiasm of the would-be developers has not. The focus is switching from the glamorous but technically challenging hot rock projects to the more conventional shallow reserves in the aquifers. The US has been sourcing energy from a handful of such projects for several decades, and so has the town of Birdsville.

The results from Panax indicate that such wells can be drilled relatively quickly and efficiently, and this might explain the recent interest in shallow reserves expressed by energy majors AGL and Origin Energy, who have both been key investors in hot rock projects but who have now decided to apply more time, effort and money to the shallows.

If Panax can prove it has an economically viable reserve of energy and can set in train plans to connect an initial 5.9MW plant to the grid by the end of 2011, then it may convince the government to inject more funds into the industry, which is currently slated to receive less than a tenth of that promised to carbon capture and storage projects, and less than one sixth promised to large scale solar even though Energy Minister Martin Ferguson likes to talk up its potential.

This approach has flummoxed many observers, but there are signs that Ferguson may be considering supplementary funding. He was a recent visitor to the Penola project and admitted that Australia would be hard pushed to even meet its 20 per cent renewable target by 2020 without a major contribution from geothermal.

But right now, many geothermal companies cannot access funds to drill their first well, most are running short on cash, and some, such as Petratherm, which is benefiting from a $63 million grant for its Paralana project, is tapping shareholders for the second time in a year.

De Graaf agrees that the share price performance of the geothermal companies has been terrible a situation he blames on the lack of a carbon price framework, the failure at Copenhagen and the loud voices raised against the science of climate change.

We rely on specialist investors, but the low share price always holds down a companys ambitions, because there is a limit to how far want you to dilute company in issuing scrip. If the share price drops, you've got to be very careful how much of stock to sell out.