The Australian Geothermal Reporting Code (the Code) was based on the format and terminology of the well-established Joint Ore Reserves Committee Code, used for the reporting of mineral sector results.

The Code has been mandatory for members of the Australian Geothermal Energy Association (AGEA) to report to the market since November 2008. A second edition is almost ready to be launched (as at December 2009), and discussions have begun with the Australian Securities Exchange (ASX) to have the new edition incorporated into the ASX Listing Rules.

The Australian geothermal sector has expanded rapidly in the past decade, now consisting of some 13 stock exchange listed and 30 unlisted companies with geothermal exploration or development tenements.

These companies are targeting Engineered Geothermal Systems (EGS), Hot Sedimentary Aquifer (HSA) and/or direct use type geothermal plays within Australia. Some are also looking at these and ‘conventional’ geothermal plays outside of Australia – in areas where volcanic activity has produced water at high temperatures close to the surface. The scope of the new Code was designed to accommodate all forms of geothermal energy (excluding heat pumps).

Australia has long had an active capital market supporting the mining and energy sectors. Resources companies account for a significant proportion of the market capitalisation of companies listed on the ASX.

The Listing Rules of the ASX have developed alongside these traditional resources sectors to create a public reporting regime in which investors have confidence in the consistency of terminologies and mechanisms of accountability. This has greatly facilitated the raising of both debt and equity by the companies concerned. The Australian geothermal sector’s need for capital was one of the major drivers for the development of a Geothermal Reporting Code.

Overview of the Reporting Code

The Reporting Code seeks to govern how public reports of Listed Companies are worded and presented. It does not govern how geothermal resources and reserves are estimated, although if methodologies deviate significantly from the conventional techniques outlined in the Geothermal Lexicon, then that must be stated.

The governing principles of the Reporting Code are:

Transparency – This requires that the reader of any public report is provided with sufficient information, clearly and unambiguously presented, to understand the report and not be misled.

Materiality – This requires that a public report contains all the relevant information which investors and their professional advisers would reasonably require, and reasonably expect to find in the report, for the purpose of making a reasoned and balanced judgment regarding the material being reported.

Competence – This requires that the public report be based on work that is the responsibility of suitably qualified and experienced persons who are members of recognised, relevant professional organisations and subject to accountability and a professional Code of Ethics.

Under the Code, the writer or compiler of a technical report on either geothermal exploration results, or the estimation of geothermal resources or reserves must be a Competent Person (CP), who is defined as having at least five years of relevant experience in the type of geothermal play under consideration.

If a company then wishes to make a public report based on that work, the CP concerned must be satisfied as to the form and content of the public report and then must consent in writing to be personally identified as such in the report. This places a dual onus on the reporting company and the CP to produce a public report that is transparent, material, competent and defendable.

The categorisation of resources and reserves under the Reporting Code is illustrated as follows.

Technical knowledge and confidence

With increasing levels of technical knowledge and confidence, geothermal resources progress from Inferred to Indicated to Measured.

There is no claim or implication of the ability to economically extract any of the estimated resources at the time of reporting (i.e. for electricity production or direct use), however there should be some expectation that reported resources may be economic under plausible circumstances in the future. Demonstrating energy extraction at a profit

If studies into energy recovery and conversion, economic, marketing, legal and other factors are undertaken, so as to demonstrate energy extraction at a profit, then Indicated Resources may be converted into Probable Reserves and Measured Resources may be converted into Proved Reserves.

The level of knowledge regarding Inferred Resources is always such that they may never convert directly into reserves. Reserves may fall back to resource status if the economics of the project decline.

Current developments

The 2008 edition of the Code was reviewed during 2009 via appraisal of its performance, effectiveness and the technical outcomes resulting from its implementation and through extensive consultation with industry.

The major outcome from this review will be enshrined in the second edition of the Code. The major effect was to change the definition of Resources and Reserves from thermal energy in place to recoverable thermal energy; units remain as petajoule thermal or megawatt thermal years.

All estimates must quote a recoverable figure and state assumptions such as recovery factor(s), base and cut-off temperatures and other key inputs. An estimate of the resource or reserve in terms of total electrical generation (in PJ electric or MWe-years) or electrical generation over a period (x MWe for y years) may also be quoted, but only in addition to the recoverable thermal energy figure. Again, conversion factors and major assumptions must be stated.

The requirements for CP statements and sign-offs did not change in the second edition of the Code, but were made more explicit.