It follows a move by Osiris to reach an agreement with pulp and paper company Protavia to power a new mill in the region.

In July the South Australian Department of Primary Industries Specialist awarded geothermal energy company Osiris an exploration licence for the Penola area of the basin in the state’s southeast.

Origin had originally applied for overlapping licences in this region. Origin is active in this part of the Otway and is looking for energy sources to replace its depleting Katnook gas field and supply power to local customers.

Following discussions between the companies, Origin withdrew its application for the tenement and the two companies signed an agreement under which Osiris will undertake the exploration and Origin will have the option to participate in any capital raisings by Osiris.

This may include seed capital, an initial public offering on the Australian Securities Exchange, and any capital-raising associated with developing identified geothermal resources in the permit area.

Meanwhile, Osiris is in discussions with pulp mill developer Protavia to supply geothermal energy to the planned Penola Pulp Mill, due to begin construction later this year.

Osiris’ geothermal exploration licence overlaps the pulp plant’s site and Protavia will need the equivalent of 200MW of power generation per year and another two petajoules in thermal drying power.

Osiris Energy plans to develop electricity generation from geothermal energy sources free from carbon emissions. The company says there will also be cogenerated secondary heat at up to 80C for direct heating applications.

Negotiations between the companies are in the early stages because the geothermal technology has not yet been fully developed. But the two companies have signed a memorandum of understanding “to define value in the proximity of a potential energy producer and a high-energy consumer”.

The mill will take up to 1.4 million tonnes of bluegum woodchip annually and produce 700,000 tonnes of hardwood pulp using a chemi-thermo-mechanical process.

Osiris says the Penola area has several features that make it particularly likely as a conventional geothermal resource, including relatively high geothermal gradients and temperatures, good water reservoirs and an extensive database of petroleum wells and seismic data.

Osiris Energy is a new, privately-held entrant to Australian geothermal exploration and development. The company was formed to locate, define and exploit geothermal resources suitable for power generation and other ancillary uses requiring energy in the form of heat.

It is exploring for hot, dry fractured rocks in the Cooper Basin (GELs 220 and 221) and conventional geothermal reservoirs in the Otway Basin’s Penola Trough region (GEL 223).