The Gas Find That Could Transform Europe’s Energy Future
Riding on the heels of Austria’s largest gas discovery in 40 years by Austrian OMV, junior explorer MCF Energy (TSXV:MCF; OTC:MCFNF) announced on Monday morning another potentially significant find in their maiden drill in the Austrian Alps.
On Monday, just days into its first drill in Austria, MCF Energy and partner ADX encountered 115 meters of rich gas shows between 1,452 and 1,567 meters deep at Welchau-1, “with strong evidence of natural fracturing, essential for gas production performance,” the company said in a press release.
Image 2- The RED Drilling Rig E200 at the Welchau-1 location (CNW Group/MCF Energy Ltd.)
De-risking the Welchau play in Austria may not just be a big step toward Austrian energy independence, it may also ease Europe's $800 billion energy crisis.
The property is analogous to large anticline structures discovered in Kurdistan and the Italian Apennines. In fact, the structure at Welchau is so large you can actually see it from space.
This wasn’t a blind drill by MCF Energy.
The explorer was taking cue from a historical discovery nearby. MCF’s Welchau well is just five kilometers north of the Molln-1 well, which was drilled in the 1980s, with a gas column of at least 400 meters and tested condensate-rich, pipeline-quality gas at a maximum flow rate of 3.5 million mmcfpd. Welchau is targeting the same reservoirs as the Molln-1 well.
Last year, MCF Energy (TSXV:MCF; OTC:MCFNF) CEO James Hill said in a press release that “A successful outcome at Welchau could be a significant catalyst for MCF Energy given the size of the Welchau anticline."
That’s the point the junior explorer has now reached, and the timing is significant.
Back in the ‘80s when the Molln-1 discovery was made, gas wasn’t worth extracting in Europe. Prices were low and cheap Russian gas ruled the day. Since then, supermajors have refocused their sites on offshore, deep-water bonanzas, and Western Europe’s domestic gas sources were largely abandoned.
Fast forward to 2022 and Russia’s invasion of Ukraine that led to broad Western sanctions squeezing all of Moscow’s gas out of Europe, and we have the perfect setup for a return of drillers to Western Europe.
Now it’s time to get down to business on this fast-paced play.
Testing will soon be underway at Welchau-1, which was drilled to a total depth of 1,733.1 meters. “Above the primary target, drilling encountered a 380-metre section of the Lunz Formation, which has effectively trapped gas and condensate. This formation served as an essential seal, with results from this well successfully mitigating initial concerns about its quality and thickness,” MCF said in a March 18 press release.
The primary target was the Steinalm Formation, at a depth of 1,452 meters, in the same zone which flowed gas and condensate from the Molln-1 well, with the company noting that “the compositional analysis of the gas shows at Welchau closely matches the condensate-rich gas previously tested in the Molln-1 well”.
MCF extracted a continuous core of approximately 7 meters from the formation between 1,511 and 1,519 meters to analyze rock characteristics, which will enhance gas production, completion and performance. The visible ends of the cut core sections revealed a highly fractured carbonate structure, the company said. Fractured carbonate forms the reservoir for the gas and condensate, the better the fractures the better the well.
Image 1- Fractured Steinalm Carbonate core recovered in Welchau-1 (CNW Group/MCF Energy Ltd.)
Germany Next as MCF Targets Rejuvenation of Europe’s Oil & Gas Prospects
As soon as drilling is complete at Welchau-1 at the end of the month, MCF is planning on moving its drill rig to Germany, where it has licenses secured for six large-scale project areas in the country’s northern and southern regions. These key projects are the result of MCF Energy’s strategic 100% acquisition of Germany’s Genexco GmbH, which was established in 2014 by some of Europe's largest energy producer insiders. It carefully assembled a portfolio of exploration and development assets when few others were paying attention.
The Genexco acquisition gave MCF Energy (TSXV:MCF; OTC:MCFNF) four key assets that include previously drilled wells and two discoveries, including its next drill, the Bavarian Lech East, and West Lech prospects, where they will re-enter the Kinsau #1 well targeting the productive reservoirs found by that well.
Back in 1983, this same well, Kinsau #1 tested at a maximum flow rate of 24 MMCFD. MCF’s 20% interest in this concession (through its Genexco acquisition) is carried, which means it won’t be paying for the cost of drilling, which the Company estimates to be up to 5 million euros.
The Kinsau #1 well, originally drilled by Mobil in the ‘80s, encountered a primary gas reservoir with associated condensate. But again, gas wasn’t economic back then.
The company is now preparing for an ambitious 4.6-million-euro exploration program for West Lech (10 sq kilometers) and East Lech (100 sq kilometers), for which it has 120 square kilometers of 3D and the latest in AI exploration software and machine learning that gives them a huge window onto where to drill.
MCF has spent a significant amount of time analyzing the cores from these wells, and Hill isn’t just eyeing recoverable gas with associated condensates; he’s also eyeing an oil zone, noting that in the ‘80s, using only a vertical well, as the technology of the day afforded, the Kinsau #2 well produced almost 200 bpd. MCF is studying going back in and recreating this with a horizontal well to stimulate a zone that they know contains hydrocarbons already. Horizontal wells produce at much higher rates than vertical wells and more effectively drain the reserves.
MCF is also gearing up to drill another German prospect--Reudnitz, a proven, large-scale natural gas development that also contains an oil exploration target, as well as the Erlenwiese concession in the Rhein Graben which covers about 80 square kilometers.
Reudnitz, some 70 km southeast of Berlin, was initially discovered in 1964 with multi-zone hydrocarbon potential and proven phases of Helium (~0.2%), methane (14-20%), and like most fields in northern Germany high nitrogen content (>80%). According to the company, pilot test production should start this year. After testing development is planned using cryogenic technology for helium and nitrogen sequestration. The Company announced an independent assessment best estimate (P50) at 118.7 billion cubic feet (BCF) of methane, 1.06 BCF of helium and 4.4 million barrels of oil. The European Gas Renaissance
Austrian OMV’s recent major discovery is only the beginning.
Right now, Western Europe is importing expensive gas from all over the world. It’s even gone back to dirty coal in its quest to shed Russia’s weaponized energy.
Europe requires a safe, domestic source of energy, and since we are in the midst of an energy transition, it will have to be cleaner than coal. Natural gas is the obvious bridge fuel. Renewables alone are not up to capacity, which Europe learned when Russia invaded Ukraine and Western sanctions sent the continent’s energy supply into a state of crisis.
The fallout from that crisis had cost the European Union an estimated $1 trillion as of December 2022, according to Bloomberg.
The only medium-term answer for Europe is domestic natural gas, with the gaps filled in with LNG.
Europe’s under-investment in natural gas has been laid bare, and now we are in the middle of a historical energy reset, with trillions of dollars up for grabs. Natural gas is being reclassified as green and sustainable by the EU, which is a boon for the development of MCF Energy’s (TSXV:MCF; OTC:MCFNF) assets.
LNG imports at huge volumes are not sustainable, and once China’s post-COVID economic recovery is complete, Europe will find itself priced out.
Against this backdrop, a discovery by a junior explorer in its first drill in Austria bodes well for de-risking one of the biggest new natural gas plays since Russia invaded Ukraine. It also is the first to offer investors an opportunity to get in on the ground floor of Western Europe’s gas renaissance with a pure play option.
Other companies to keep an eye on in Europe’s energy revolution:
TotalEnergies’ (NYSE:TTE) extensive investment in natural gas infrastructure, including pipelines and state-of-the-art LNG facilities, underscores its strategic commitment to leading Europe's shift towards a more sustainable, gas-driven future. Additionally, TotalEnergies is pioneering in renewable energy sources, expanding its portfolio to include solar, wind, and bioenergy projects, thereby reinforcing its commitment to a low-carbon future.
Despite its forward-looking stance on natural gas and renewables, oil continues to be a crucial component of TotalEnergies' portfolio. The company's expansive global operations in oil exploration and production are testament to its expertise in the sector, with a strong emphasis on efficiency, sustainability, and compliance with the highest environmental standards. Recent initiatives, such as investments in carbon capture and storage technologies, highlight TotalEnergies' efforts to innovate within the oil sector and reduce the environmental impact of its operations.
Investors eyeing TotalEnergies are presented with a company that seamlessly blends traditional energy operations with ambitious forays into the renewable sector. Its comprehensive approach to energy production, emphasizing both growth and sustainability, positions TotalEnergies as a pivotal player in the evolving global energy market.
Eni (NYSE:E) stands as a dynamic force in the energy sector, known for its agility in navigating the shifting landscapes of energy demand. The company's strategic expansion into the natural gas market, particularly in the Mediterranean and North African regions, aligns perfectly with Europe's growing appetite for cleaner energy sources. Eni's commitment to sustainability is further demonstrated by its ventures into renewable energy sources and efforts to reduce the carbon footprint of its operations.
Oil, however, remains a linchpin in Eni's diverse energy portfolio. The company's global footprint in oil exploration and production showcases a deep-seated expertise, with a consistent drive towards enhancing environmental sustainability and operational efficiency. Eni's research and development efforts are geared towards introducing innovative technologies that not only optimize oil production processes but also significantly reduce the environmental impact.
Eni represents an attractive proposition, blending a proactive approach to natural gas and renewable energy with robust capabilities in oil exploration and production. The company's strategic initiatives and commitment to innovation signal strong growth potential and a steadfast position in a rapidly evolving energy landscape.
Equinor (NYSE:EQNR) is more than Norway's oil and gas giant; it's a testament to the energy sector's evolving narrative towards sustainability and innovation. With roots anchored in the rich oil traditions of the North Sea, Equinor has boldly embraced the transition to greener energy alternatives, marking significant forays into hydrogen and offshore wind energy projects. This strategic shift is not merely a nod to the growing environmental consciousness but a clear commitment to spearheading Europe's march towards a sustainable energy future.
Equinor's partnerships in developing cutting-edge hydrogen projects and substantial investments in offshore wind underline its role as a catalyst for change, melding traditional energy expertise with a visionary approach to renewable energy solutions.
As Europe seeks to redefine its energy consumption patterns, Equinor's pivot towards these sustainable energy sources positions it as a central figure in the continent's green transition, offering investors a unique blend of established industry leadership and forward-thinking environmental stewardship.
BP (NYSE:BP) has long stood as a colossus in the global oil landscape, yet in recent years, it has astutely navigated the shifting tides towards cleaner, more sustainable energy sources. With a rich history that has seen the company at the heart of the energy industry, BP is now leading the charge towards a greener future with its strategic expansion into natural gas and a keen focus on renewable energy initiatives.
Recognizing the critical role of natural gas as a transition fuel, BP has significantly invested in infrastructure to support its distribution and consumption, aiming to meet Europe's growing demand for cleaner energy solutions.
Beyond natural gas, BP's exploration of hydrogen energy and renewable technologies showcases its comprehensive approach to sustainability, aiming to reduce environmental footprints and pioneer new paths in energy production. With these initiatives, BP is not just adapting to the changing energy landscape but actively shaping it, presenting a compelling narrative of transformation and sustainability for investors and stakeholders alike.
Shell (NYSE:SHEL) embodies the dynamic transition of the energy sector from traditional fossil fuels to a future powered by cleaner, renewable energy sources. With a storied legacy in oil exploration and production, Shell is redefining its identity through substantial investments in natural gas and renewables, aligning its operations with the global push towards sustainability.
Shell's strategy reflects a deep understanding of the energy market's complexities, balancing the immediate need for oil and gas with the long-term vision of a low-carbon future. The company's significant forays into LNG terminals and gas pipelines are complemented by ambitious renewable energy projects, signaling Shell's commitment to being at the forefront of the energy transition.
This multifaceted approach not only reinforces Shell's position as an industry leader but also highlights its role as an innovator in the quest for sustainable energy solutions, offering investors a stake in a company that is shaping the future of energy with resilience and foresight.
Halliburton Company (NYSE:HAL), emerges as a titan in the oilfield services sector, providing an array of essential services and products that cater to the upstream oil and gas industry. With a significant footprint in Europe, Halliburton plays a crucial role in bolstering the region's oil and gas exploration and production endeavors. The company’s dedication to innovation and efficiency, particularly through the development of sustainable technologies such as hydraulic fracturing and shale gas production, positions it as a vital player in Europe's journey towards energy security and environmental stewardship.
Halliburton's commitment to the digital transformation of the oil and gas sector sets it apart. By harnessing the power of big data, artificial intelligence (AI), and machine learning, Halliburton is revolutionizing drilling and production processes. This strategic focus not only enhances the precision and efficiency of services but also significantly mitigates the environmental impact associated with drilling activities. Halliburton's pioneering efforts in integrating technology into every facet of its operations underscore its role as a leader in advancing the energy sector's sustainability goals.
Schlumberger Limited (NYSE:SLB), as the foremost provider of technology and services to the global oil and gas industry, stands at the forefront of Europe's energy sector transformation. Schlumberger's comprehensive portfolio of cutting-edge technologies for reservoir characterization, drilling, production, and processing is instrumental in elevating the operational standards across the continent.
The company's unwavering commitment to pushing the boundaries of innovation and operational efficiency is pivotal in assisting European oil and gas operations to maximize recovery while minimizing costs and environmental footprint.
At the heart of Schlumberger's mission is a profound dedication to research and development, which propels the company to the vanguard of the energy transition. By offering solutions that significantly enhance the sustainability and productivity of the European oil and gas industry, Schlumberger not only shapes the future of energy but also presents a compelling opportunity for investors keen on companies that are redefining the energy landscape through technological excellence.
Suncor Energy (TSX:SU) stands as a beacon of integration and innovation in Canada's energy landscape, with a pronounced emphasis on the natural gas sector and significant involvement in the oil sands. Suncor's strategic exploration and exploitation of Western Canada's abundant natural gas reserves underscore its commitment to meeting North America's escalating energy demands. At the core of Suncor's operations is its oil sands business, where the company is recognized as one of the world's largest operators, driven by a relentless pursuit of efficiency and sustainability through state-of-the-art technologies.
Suncor's dedication to sustainability permeates its operations, evidenced by ongoing efforts to diminish carbon footprints and environmental impacts. This commitment, coupled with Suncor's adaptability to the dynamic energy market, underscores its unique positioning in the energy sector. For investors, Suncor represents a harmonious blend of stability and innovation, offering a robust foothold in the traditional energy sector while ambitiously navigating the path towards a more sustainable energy future.
TC Energy (TSX:TRP) exemplifies a linchpin in the fabric of North American energy infrastructure, its extensive pipeline network serving as the backbone for the continent's energy distribution. With thousands of kilometers of natural gas pipelines, TC Energy efficiently fuels homes, businesses, and industries across North America, underscoring its pivotal role in the energy landscape. This infrastructure prowess extends to oil, where TC Energy's pipelines are vital arteries connecting the oil sands to refineries and markets, ensuring the seamless flow of resources essential to the economy.
For investors, TC Energy represents a cornerstone investment in the infrastructure that powers North America's energy needs. The company's strategic focus on both natural gas and oil infrastructure not only provides a stable foundation but also positions TC Energy for sustained growth amid evolving energy demands. This blend of stability and growth potential, coupled with a commitment to operational excellence and sustainability, makes TC Energy a compelling proposition for those seeking to invest in the critical infrastructure driving the energy sector forward.
Whitecap Resources Inc. (TSX:WCP) stands as a testament to strategic growth and responsible development in the oil and gas sector, focusing on the rich resources of the Western Canadian Sedimentary Basin. Through a mix of disciplined acquisitions and the development of low-decline assets, Whitecap has carved a niche for itself as a company dedicated to delivering sustainable shareholder returns. This strategy, grounded in operational efficiency and cost control, has positioned Whitecap as a leader in conventional oil and natural gas development.
Whitecap's commitment to environmental stewardship and sustainable development is central to its corporate ethos. By implementing initiatives aimed at reducing its carbon footprint and enhancing the sustainability of its operations, Whitecap not only addresses the environmental concerns inherent in the energy sector but also sets a benchmark for industry practices. This dedication to responsible energy development, combined with a focus on strong governance and community relations, positions Whitecap Resources as a forward-thinking player in the energy market, offering investors an opportunity to participate in a company that is shaping the future of energy with a keen eye on both growth and sustainability.
By. James Stafford
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Forward-Looking Statements
This publication contains forward-looking information which is subject to a variety of risks and uncertainties and other factors that could cause actual events or results to differ from those projected in the forward-looking statements. Forward looking statements in this publication include that large oil and gas companies will continue to focus on offshore natural gas resources; that domestic onshore natural gas assets in Europe will provide a more affordable energy source than offshore resources; that demand for natural gas will continue to increase in Europe and Germany; that Russia will not supply the majority of natural gas in Germany and Europe; that natural gas will continue to be utilized as a main energy source in Germany and other European countries and demand for natural gas, and in particular domestic natural gas, will continue and increase in the future; that MCF Energy Ltd. (the “Company”) can replicate the previous success of its key investors and management in developing and selling valuable energy assets; that the natural gas projects of the Company will be successfully tested and developed; that the Company can develop and supply a safe, domestic source of energy to European countries; that natural gas will be reclassified as sustainable energy which will support the development of the Company’s assets; that imports of liquified natural gas will not be sustainable for Europe and that European countries will need to rely on domestic sources of natural gas; that the Company expects to obtain significant attention due to its upcoming drilling plans combined with Europe desperate for domestic natural gas supply; that the upcoming drilling on the Company’s projects will be successful; that the Company’s projects will contain commercial amounts of natural gas; that the Company can finance ongoing operations and development; that the Company can achieve its business plans and objectives as anticipated. These forward-looking statements are subject to a variety of risks and uncertainties and other factors that could cause actual events or results to differ materially from those projected in the forward-looking information. Risks that could change or prevent these statements from coming to fruition include that large oil and gas companies will start focusing on the development of domestic natural gas resources; that the natural gas resources of competitors will be more successful or obtain a greater share of market supply; that offshore liquified natural gas assets will be favored over domestic resources for various reasons; that alternative technologies will replace natural gas as a mainstream energy source in Europe and elsewhere; that demand for natural gas will not continue to increase as expected for various reasons, including climate change and emerging technologies; that political changes will result in Russia or other countries providing natural gas supplies in future; that the Company may fail to replicate the previous success of its key investors and management in developing and selling valuable energy assets; that the natural gas projects of the Company may fail to be successfully tested and developed; that the Company’s projects may not contain commercial amounts of natural gas; that the Company may be unable to develop and supply a safe, domestic source of energy to European countries; that natural gas may not be reclassified as sustainable energy or may be replaced by other energy sources; that the upcoming drilling on the Company’s projects may be unsuccessful or may be less positive than expected; that the Company’s projects may not contain commercial amounts of natural gas; that the Company may be unable to finance its ongoing operations and development; that the Company can achieve its business plans and objectives as anticipated; that the Company may be unable to finance its ongoing operations and development; that the business of the Company may be unsuccessful for various reasons. The forward-looking information contained herein is given as of the date hereof and we assume no responsibility to update or revise such information to reflect new events or circumstances, except as required by law.
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