MOL Plc.'s upstream department has developed a portfolio analyses approach, which became also a key tool for the evaluation of our geothermal project portfolio.

The paper will introduce this approach and the relating analytical tools, in order to understand more deeply the value created by portfolio effect in case of a geothermal project portfolio, but also describes the boundaries to take into consideration in this specific industry. Based on a set of sample projects (reflecting to some real opportunities) the paper will introduce the results of our analyses (based on Monte-Carlo simulation), how the increasing size of a portfolio may shape the overall risk profile for the company, and how can it create value for investors. The paper will introduce in details both the individual projects' and the full portfolio's sensitivity to specific factors, like CAPEX/OPEX increase, change in geological probability, flow rates or regulatory environment, and the effect of addition/exclusion of individual project on the whole portfolio's risk/return profile.

Based on the results the paper will also summarize the main potential systematic failures, which can mislead the calculations and therefore also the main messages of the analyses, which requires special attention from decision makers prior making decisions based on the results of these analyses.

The paper will introduce a methodology, based on which companies can find its answers for the following key questions:

What type of projects I need into my portfolio?

What is the minimum portfolio size required to achieve appropriate risk profile?

What are the major success factors from technical and business point of view, I have to allocate special focus to?

2. Introduction
2.1. Geothermal power generation
2.1.1. Geothermal energy

Geothermal energy is thermal energy generated in the Earth. Geothermal energy originates from radioactive decay of minerals and volcanic activity. It can be utilized the most effectively in regions of high geothermal gradient, which is a measure of temperature difference between the core of the planet and its surface, drives a continuous conduction of thermal energy in the form of heat from the core to the surface.

There are two basic types of geothermal power systems: hydrothermal and hot rock or enhanced geothermal systems. Normally conventional hydrothermal reservoirs are found in volcanic zones where temperatures are relatively high near the surface. However, geothermal reservoirs can also be found in non-volcanic areas, where the crustal heat flow is sufficient to produce high temperatures and the rocks are permeable to allow the production of large volumes of fluid.

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