June 19 (Bloomberg) -- Nicaragua plans to open its largest volcano to geothermal exploration as record oil prices force the government to seek new sources of energy.

Concessions to extract energy from the San Cristobal Volcano, which has the largest energy potential of the country's 12 geothermal sites, will be put up for bid, Nicaragua's Energy Ministry said. The government will consider offers of least $30,000 made before July 31, according to a statement posted on the Energy Ministry Web site today.

Energy Minister Emilio Rappacioli told national lawmakers this month that the government is working on plans to switch to entirely alternative energy within five years. The plan aims to tap hydroelectric and geothermal reserves that may produce an estimated 3,000 megawatts of power a day.

``There's a lot of potential,'' said Heather Berkman, a Latin American analyst with the Eurasia Group. ``The problem is that investors are hesitant to put money on the ground because there's so much political uncertainty.''

President Daniel Ortega, who had promised to end Nicaragua's energy crisis with discount Venezuela oil, said on June 14 that the country aims to phase out fuel-based power plants in favor of alternative energy.

About 80 percent of Nicaragua's electricity is supplied by fuel-burning power plants. The country has suffered 4-hour-a day blackouts since oil soared to record prices in May.

Tax Incentives

The National Assembly passed a law this month that grants increased tax incentives and a higher tariff that companies can charge to produce geothermal energy.

The San Cristobal volcano, with 225 megawatts of potential, could power half of Nicaragua' energy needs, according to the Energy Ministry.

Reno, Nevada-based Ormat Technologies Inc. runs the country's Momotombo power plant. Canada's Polaris Geothermal controls the San Jacinto-Tizate geothermal power concession.

Crude oil traded in New York climbed to its most recent record of $139.89 a barrel on June 16. Prices are 93 percent higher than a year earlier.

To contact the reporter on this story: Eric Sabo in Managua, Nicaragua at esabo1@bloomberg.net.

Last Updated: June 19, 2008 14:51 EDT