History of the Concession

History of the Concession

The first geoscientific studies in the area of the San Jacinto Project concession were conducted in 1953 and consisted of measurements of heat flow from the surface manifestations at San Jacinto and Tizate. Steam was also observed to be flowing from shallow wells in the area.

From 1969 to 1971, the United States Agency for International Development (Usaid) implemented a geothermal exploration program over the western part of Nicaragua, managed by Texas Instruments Inc. Based on the results of this program, the San Jacinto-Tizate area was identified as having a high priority for development. The program included a range of surface exploration surveys and the drilling of four shallow temperature gradient wells, one of which encountered a temperature of 105°C at shallow depth.

The United Nations Development Program (the “UNDP”) carried out further surface exploration in the area during 1973 and a potential resource area of 6 km2 was delineated based on resistivity measurements. Based on this area, the UNDP estimated the field development potential to be on the order of 100 MW. Through the late 1970’s and early 1980’s further geophysical surveys and surface studies were undertaken by a number of agencies. This work indicated that a high temperature (250°C to 300°C) resource existed in the San Jacinto-Tizate area, with an apparent high resistivity zone at 1,500 to 1,600 m, which was interpreted to correspond to the bottom of the productive reservoir.

In 1992, Dal SpA reviewed all available information and performed additional geological work on behalf of the Instituto Nicaraguense de Energía (INE). This led to the conclusion that the upflow for the field was probably located in the area of Tizate, with an outflow towards San Jacinto.

In late 1992, Intergeoterm, a joint venture company owned by ENEL (77.0%) and Burgazgeoterm (23.0%), a wholly-owned subsidiary of Gazprom (a Russian gas company), began work on a feasibility study for development of the San Jacinto Project concession for power generation. This work included further surface exploration and the drilling of seven commercial diameter wells. The wells ranged in depth from 728 to 2,339 m and were completed between 1993 and 1995, although the last well, SJ-7, was suspended before it reached the proposed target depth.

The drilling of these wells provided significant additional data on the sub-surface conditions, including geological information and downhole temperature and pressure profiles, and confirmed that the highest temperatures were present near Tizate. Five of the wells were tested, by production and/or injection, and three (SJ-4, 5 and 6) were considered to be commercial producers. Interference tests were also conducted during 1995 to provide additional information on the degree of interconnection between the various wells.