Europe's Secret Weapon In Its Energy War With Russia

 FN Media Group Presents Oilprice.com Market Commentary

LONDON, March 12, 2024 /PRNewswire/ -- If Germany fails to make up for its winding down of Russian natural gas imports, high-priced LNG imports, delayed nuclear power phaseout, and even restarting of dormant coal plants will be the outcome.   That consensus led Berlin, in early February, to earmark $16 billion for the construction of four major natural gas plants to meet electricity demand, in addition to expansion of renewable energies.   Companies mentioned in this release include: Halliburton Company (NYSE:HAL), Schlumberger Limited (NYSE:SLB), Enbridge Inc. (NYSE:ENB), Golar LNG Limited (NASDAQ:GLNG), Transocean Ltd (NYSE:RIG).

While Germany has struggled strategically and politically in its effort to balance its climate change goals with its energy security needs, Austria has not only refrained from turning off the Russian gas taps—opting for a gradual approach--but it's also recently made the country's largest natural gas discovery in 40 years. 

Canadian small-cap explorer MCF Energy (MCF.V; MCFNF.QX) has scooped up previously explored and tested projects in Germany and large prospective targets in Austria at what may be the most significant time in Europe's energy supply history.

Drilling recently launched in Austria (and as of 11^th March the company has just confirmed an active petroleum system at the well site), and is planned to start in Germany in April.  

On the Heels of OMV's Giant Discovery

Of key interest here to Europe will be MCF's initial project in Austria, the  Welchau prospect near the Alps, where drilling will begin in just a few days. 

MCF Energy's  Welchau prospect appears analogous to large anticline structures discovered in the Kurdistan Region of Iraq and the Italian Apennines, and adjacent to an up-dip discovery that intersected a gas column and has a potential for 400 meters of closure.

All elements look to be in place for a significant discovery, with a best-estimate technical prospective resource of approximately 807 billion cubic feet of gas, proximity to the national gas pipeline system (~18km), and a nearby historic gas discovery. Welchau is targeting the same reservoirs as the nearby Molln-1 well, which tested gas in 1989.

A national gas pipeline network is only 18 kilometers away, making for what could be a short, cheap tie-in option for getting products to domestic markets. 

MCF will earn a 25% interest for exploration drill costs estimated at 2.55  million euros, which represents MCF's 50% share in drilling costs.

Drilling Down for German Energy Security

In Germany, where MCF's drill heads in April, the company is re-opening an oil and gas play that spans over 100 square kilometers, in the Lech and Lech East concessions.

Lech (10 square kilometers) and Lech East (100 square kilometers) concessions hold natural resources riches that have already seen two discoveries and three previous wells drilled.

In April, MCF (MCF.V; MCFNF.QX) will re-enter Mobil's former Kinsau #1 well, adapting new drilling technology and later horizontal wells to stimulate the hydrocarbons that are already known to exist. MCF Energy is targeting  potentially  billions  of cubic feet of recoverable natural gas—and possibly more, with associated condensate. 

These shallow wells, cheap to drill, from proven, previously drilled holes could translate into quick cash flow for MCF Energy. And one hit could flare out into multiple development zones for each well.

MCF's Reudnitz concession, a large-scale natural gas prospect initially discovered in 1964, is the third German asset, with MCF stating an independent assessment estimated  118.7 billion cubic feet of natural gas for extraction, noting that the resourses  are similar to other gas fields in northern Germany  with nitrogen also present. MCF also disclosed that the gas in Reudnitz best estimate (P50) also contains  a potential for 1.06 BCF of helium and 4.4 million barrels of oil in a shallower target. Pilot test production using cryogenic technology for targeted helium and methane extraction and nitrogen sequestration is set to begin later this year.

The World's 4th-Largest Economy, In Focus

MCF Energy has adopted a laser focus on Europe's energy security requirements, which is most significantly emphasized by Germany, the largest economy of the European Union.

Germany has seen its bill for oil and gas imports soar since Russia invaded Ukraine. U.S. LNG exports to Europe soared in 2022 and 2023.

Expensive LNG is not a sustainable energy security strategy, nor is a return to coal feasible in terms of any reasonable climate change goals. Germany has been busy building grandiose LNG terminals, and is now gunning for big natural gas-powered electric plants, but even those plans will face risk without any domestic supply.  

MCF Energy (MCF.V; MCFNF.QX) believes the answer is found in domestic natural gas, the increasingly accepted bridge fuel for a green energy transition. This belief translates into the first new public company with exposure to European natural gas since Russia invaded Ukraine. 

Other energy companies to keep an eye on this year:

Halliburton Company (NYSE:HAL), a global giant in oilfield services, profoundly impacts the European energy sector through its innovative solutions and dedication to efficiency and sustainability. In Europe, where the energy landscape is rapidly evolving, Halliburton's contributions to oil and gas exploration and production are invaluable.

Halliburton's emphasis on digital transformation further distinguishes it within the industry. By harnessing the power of big data, AI, and machine learning, Halliburton is at the forefront of optimizing drilling and production processes.

With a vast array of innovative technologies for reservoir characterization, drilling, production, and processing, Schlumberger Limited (NYSE:SLB) supports Europe in maximizing its energy recovery, streamlining costs, and improving the environmental performance of oil and gas operations.

In Europe, Schlumberger's role extends beyond traditional oil and gas services. The company is actively involved in pioneering solutions for the energy transition, including carbon capture and storage (CCS) technologies, geothermal energy exploitation, and the development of digital platforms that enhance operational efficiencies across the energy sector.

Enbridge Inc.'s (NYSE:ENB) strategic ventures into Europe through significant investments in offshore wind energy projects and energy transportation infrastructure signify a remarkable extension of its operational excellence beyond North American borders. Enbridge's foray into the burgeoning offshore wind market in Northern Europe underscores its commitment to leading the energy transition towards more sustainable sources.

Enbridge's pioneering efforts in carbon capture, utilization, and storage (CCUS) underscore its comprehensive approach to facilitating a sustainable energy transition globally, including Europe.

Golar LNG Limited (NASDAQ:GLNG) is a pioneer in the LNG sector thanks to its innovative floating LNG technology, which has revolutionized the way natural gas is liquefied, stored, and regasified, especially pertinent in Europe's quest for energy diversification and security. By providing flexible LNG solutions that can be deployed closer to demand centers, Golar supports Europe in reducing its dependency on pipeline gas.

The company's projects, aimed at reducing the carbon footprint of LNG operations, resonate with Europe's stringent environmental policies and the broader global shift towards sustainable energy logistics.

Transocean Ltd (NYSE:RIG), with its specialization in deepwater and harsh environment drilling, is essential in unlocking new oil and gas reserves beneath Europe's challenging sea conditions, particularly in the North Sea. The company's commitment to incorporating advanced technology and sustainability into its operations is critical for adhering to Europe's rigorous environmental and safety standards.

Transocean's investment in next-generation drillships, which emphasize efficiency and reduced environmental impact, positions it as a leader in sustainable offshore drilling, directly aligning with Europe's goals for cleaner energy extraction methods.

By. Charles Kennedy

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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 high-priced LNG imports, delayed nuclear power phaseout, and even restarting of dormant coal plants will occur if Germany fails to sustainably make up for its winding down of Russian natural gas domestically; that renewable energy cannot yet bridge the gap in the energy transition, and resorting to coal would set things back drastically for the climate; that MCF Energy Ltd. (the "Company") will complete the planned drilling and testing of its prospects later this year and early next year; that the previous test results of the Company's projects will be indicative of future success in further drilling and testing; that Company's projects will be successfully drilled and tested and contain commercial amounts of natural gas, oil and/or other energy resources; that successful drilling and testing on adjacent properties will be indicative of potential for drilling and testing success on the Company's prospects;  that actual drilling and testing of the Company's projects will confirm technical prospective estimates; that Europe will have and continue to have a strategic energy problem and price volatility for natural gas will continue to increase; that natural gas will continue to be accepted as a bridge fuel for a green energy transition; that costs for liquified natural gas will remain high and that LNG will not be a sustainable energy security strategy in Europe; that the Company can provide domestic natural gas to Germany and other European economies; that natural gas will remain classified as a sustainable energy source; that the Company's concessions will be successfully drilled and tested and, if developed, will strengthen German and Austria energy security; 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 be able to complete the planned drilling and testing of its prospects later this year and early next year for various reasons; that the previous test results of the Company's projects may not be confirmed with further drilling and testing; that Company's projects may fail to contain commercial amounts of natural gas, oil, helium and/or other energy resources; that successful drilling and testing on adjacent properties is not indicative of any potential for drilling and testing success on the Company's prospects; that Europe may opt for alternative energy sources resulting in a decreased demand for natural gas, even in the event that the Company can develop gas resources; 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 or remain classified as sustainable energy or may be replaced by other energy sources; 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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