AWE LIMITED has withdrawn from a joint venture project with Green Rock Energy after saying the area targeted did not have enough hydrocarbons to make the project worthwhile.

AWE and the geothermal energy company had signed a memorandum of understanding on 5 March 2013 which would see the two parties work together on their overlapping exploration acreages in the Perth basin.

The agreement, with Green Rock subsidiary Mid West Geothermal Power (MWGP), would have seen the two groups seek funding from the Commonwealth’s Emerging Renewables Program and the WA Government’s Low Emissions Energy Development (LEED) Fund.

That funding would have been used for the drilling of two geothermal wells, with AWE to contribute the balance of drilling costs not covered by the two government funding programs.

MWGP had already been awarded $5.4 million on a 1 for 3 basis from the LEED fund for work towards the demonstration of commercial production of geothermal energy as the first stage of the project.

AWE was entitled to assess the hydrocarbon potential of formations adjacent to the geothermal target zones while drilling the geothermal wells took place under the agreement.

In an announcement, Green Rock said the first identified location for this drilling had been rejected by AWE “because it could be within or adjacent to a Public Drinking Water Resource Area.”

Green Rock said the second location had also been rejected as it did not “provide the hydrocarbon value” AWE needed to continue with the project.

Company chairman Richard Beresford said the company was disappointed with AWE’s decision.

“Particularly as we had been close to finalising terms and conditions with both the WA and Commonwealth Governments – the LEED and Emerging Renewables Funds respectively – for them jointly to provide a substantial majority of the funds to drill and test two geothermal wells,” he said.

“Green Rock will now review the situation with all the other parties involved – including the Project’s power generation partner Pacific Hydro – but at present we consider it very unlikely that we will be able to secure an alternative funding and drilling partner to AWE in the time available.”