Yahoo Finance Forgotten Gas Reserves Could Be A Gamechanger For European Energy
The California geologist who helped develop one of Europe’s biggest heavy oilfields over two decades ago is back, and this time, he has two things in mind: European energy security and natural gas, the only viable “bridge” fuel for an energy transition.
“Not only has Europe been dependent on Russian gas for decades, but that dependence has essentially plundered the continent’s ability to produce domestically, onshore,” California geologist James Hill, who is now the CEO of MCF Energy (TSXV:MCF; OTC:MCFNF), says.
“What that means is that Europe now has to import high-priced LNG from the U.S., Russia, Qatar and Australia to make up for the shortfall,” he adds, “when previous discoveries are just waiting to be reopened in places like Germany and Austria.”
As the CEO of MCF Energy, Hill is hoping to be at the forefront of a new trend in Europe spurred by an energy crisis that is simply unlikely to ever happen again. Previous Discoveries, Reading and Waiting With large-scale exploration projects in Germany and Austria and a recent 100% acquisition of Genexco GmbH Germany, MCF Energy just started drilling last month in Austria and will then be moving the rig straight to Germany in April.
In Austria, MCF recently moved the rig on location began drilling the Welchau prospect and in their latest press release (11 March 2024) announced an active petroleum structure was discovered and that total depth will be reached before the end of the month. Welchau prospect is analogous to large anticline structures discovered in the Kurdistan Region of Iraq and the Italian Apennines, and it’s also adjacent to an up-dip from a discovery that intersected at a gas column of at least 400 meters, testing condensate rich pipeline quality gas.
All elements are in place for a significant discovery, with a best-estimate technical prospective resource of 584 billion cubic feet of gas with 10.1 MBO, proximity to the national gas pipeline infrastructure (~18km), and a nearby historic gas discovery. Welchau is targeting the same reservoirs as the nearby Molln-1 well, which tested gas in 1989.
Next up is drilling in Germany’s Lech prospects in April, which MCF considers its highest-impact asset.
Lech (10 square kilometers) and East Lech (100 square kilometers) concessions hold natural resources riches that have already seen two discoveries and three previous wells drilled. In April, MCF will re-enter Mobil’s former Kinsau #1 well at Lech, adapting new drilling technology and eventually horizontal wells to stimulate the hydrocarbons that are already known to exist. Mobil established production rates of over 24 MMCF per day of natural gas with associated condensate from the Kinsau #1 in the ‘80s. Mobil was exploring for oil so never developed the gas discovery.
This well, being a re-entry of a proven, previously drilled hole could translate into quick cash flow for MCF Energy (TSXV:MCF; OTC:MCFNF), and one hit could flare out into multiple development zones for each well.
Through the acquisition of Genexco, MCF’s 25% interest in the Lech concession is fully carried which means it won’t be paying for the cost of drilling and completion, up to 5 million euros.
Kinsau #1, the well that Mobil drilled in the ‘80s, was “an absolutely huge well with tons of natural gas, with established production rates of over 24 MMCF per day of natural gas and associated condensate in the ‘80s,” Hill told Oilprice.com earlier in February. “They abandoned it because, back then, it wasn’t economic. Gas wasn’t worth anything, Mobil seemed to be exploring for oil so they drilled another well to a deeper target and got about 180 barrels of oil a day out it. After drilling a third well they didn’t pursue it much further at the time because oil prices were at the bottom of the barrel,” he said.
But Mobil also shot 3D seismic after they drilled these three wells, which MCF has inherited, and which Hill describes as a “treasure trove” and led to MCF’s acquisition of the 100 sq km Lech East concession granted in August of 2023.
“From a risk perspective this is as low a risk as you can get,” Hill said, “you're not going to miss this one because we are re-entering a well drilled in the ‘80s which produced gas and condensate at currently very economical rates. Plus we’ve got a second well with an oil zone that, back in ’83, produced almost 200 barrels a day from a vertical well. What happens if we put a horizontal well into that thing? Today technology has improved drastically in the last 40 years, we hope to do much better than what Mobil did in stimulating the production from these wells. We know where the hydrocarbons are and AI and machine learning has confirmed it giving us a template for many more future wells at Lech East.”
According to Hill, within the first fault block at Lech, from the huge flow rates of these wells, there is likely to be significant gas reserves with associated condensate. Moreover, infrastructure is already in place, with a pipeline connection less than two kilometers away which means the potential for quick cash flow.
Beyond the Lech concessions in Germany, MCF Energy also has Reudnitz, a proven, large-scale natural gas development that also contains an oil exploration target. This play was initially discovered in 1964 with multi-zone hydrocarbon potential and proven phases of Helium (~0.2%), methane (14-20%) and as with most gas fields in northern Germany, high nitrogen content (>80%). An independent assessment best estimate (P50) came back at 118.7 billion cubic feet (BCF) of methane, 1.06 BCF of helium and 4.4 million barrels of oil.
Pilot test production will start in 2024, with the future application of well-established cryogenic technology for helium, and methane separation and nitrogen sequestration.
The Undeniable Bridge Fuel An overwhelming $7 trillion is still necessary to develop gas fields, repair existing facilities and build new infrastructure to ensure enough natural gas for the world through 2050, according to a new report from the Institute of Energy Economics in Japan (IEEJ).
Crucially, that $7-trillion investment outlook is making the significant assumption that the world will see a 56% reduction in emissions by 2050. In an alternative scenario in which emissions are not reduced at all, it will take $10 trillion to ensure the world has enough gas supply. While the International Energy Agency (IEA) sees gas demand peaking this decade and bases its theory that no new long-term gas projects are necessary on this, the IEEJ disagrees, as do major producers, including Chevron and Shell. As countries shift away from dirtier coal, something needs to act as a cleaner bridge fuel as we work towards the goal of net-zero emissions. In other words, it is impossible to go to point C from point A without traversing point B.
This is MCF Energy’s investment thesis, and Europe is a prime example of the disastrous outcome of a lack of planning for the domestic production of natural gas.
At the helm of MCF Energy (TSXV:MCF; OTC:MCFNF), Mr. Hill is hoping to change things up in both Germany and Austria as the company readies the drill bit for February, 2024.
And the emphasis isn’t just on exploration, he says, but on the development of these new reserves using modern 3D seismic interpretation and AI, which he hopes will not only reopen historic European natural gas discoveries but expand them into exciting prospects for true domestic energy security. He’s been here before, in Europe. As former VP of Exploration for BNK Petroleum and Bankers Petroleum, as well as the President of the Division of Professional Affairs for the American Association of Petroleum Geologists (AAPG), Hill contributed to the development of the heaviest oil field in Europe, in Albania, where they expanded production growth by 2000%. At the time, Europe was not experiencing an energy crisis, satisfied as it was with its dependence on Russian oil and gas. Today is a very different story, and MCF Energy is following this investment thesis to its end game, scooping up proven and previously producing assets in Germany and Austria, where the hunger for domestic natural gas is clear and present, driven by a desperate need for energy security.
“We don’t just have exploration assets with huge potential … We’ve got over 118 BCF of proven methane reserves with a billion cubic feet of helium at Reudnitz in Germany. With the increasing need in industry, the helium is probably worth even more than the methane. We are exploring more green options and possibly partnering with an operator to the south that wants to convert their methane into blue hydrogen, thus contributing to the energy transition as well,” Hill said.
Other companies set to transform Europe’s oil and gas sector:
TotalEnergies SE (NYSE:TTE) adeptly balances its portfolio between natural gas and oil, reflecting a strategic foresight geared towards leading Europe's gas-driven energy future. The company's extensive investment in natural gas infrastructure, including a vast network of pipelines and advanced LNG facilities across the continent, underscores its ambition to cement a central role in shaping Europe's energy trajectory. This commitment to natural gas, considered a bridge fuel in the transition to a greener energy matrix, aligns TotalEnergies with Europe's energy diversification and decarbonization goals.
Simultaneously, TotalEnergies' prowess in the oil sector remains unmatched, with its global operations in oil exploration and production underpinning the company's success. A continuous flow of investments into cleaner drilling technologies and refining optimizations reflects TotalEnergies' dedication to sustainability and environmental stewardship, ensuring its oil operations not only meet but exceed global environmental standards.
TotalEnergies presents a nuanced investment opportunity, merging progressive natural gas initiatives with a robust foundation in the oil industry. This blend offers both growth potential and stability, positioning TotalEnergies as a versatile player in an energy market that is increasingly leaning towards sustainability and diversification.
Eni SpA (NYSE:E) stands out for its dynamic response to the evolving energy landscape, with a pronounced shift towards natural gas to meet Europe's growing demand for cleaner energy solutions. The company's strategic endeavors, particularly in the Mediterranean and North African regions, highlight Eni's capacity to leverage its geographical and operational advantages to spearhead Europe's transition to a more sustainable energy future. This focus on natural gas is complemented by Eni's unwavering commitment to innovation and sustainability in its oil operations, ensuring they adhere to the highest environmental and efficiency standards.
Eni's exploration and refining activities, while global in scope, are conducted with a keen eye on environmental sustainability, reflecting the company's holistic approach to energy production. This strategic balance between natural gas and oil, coupled with a commitment to innovation and sustainability, offers investors a unique blend of growth potential and reliability.
Eni combines an aggressive push into the natural gas sector with deep-rooted expertise in oil. This combination signals not only future growth opportunities but also a stable investment in the energy sector's sustainable transformation.
Equinor ASA (NYSE:EQNR), Europe’s second-largest natural gas supplier, has played a significant role in shaping Europe's oil and gas sector while pivoting towards renewable energies, including hydrogen and offshore wind projects. This strategic diversification showcases Equinor's adaptability and commitment to contributing to a sustainable energy future. The company's involvement in hydrogen projects, in collaboration with industry leaders, underscores its vision for a cleaner energy landscape, with hydrogen serving as a cornerstone for Europe's decarbonization efforts.
Equinor's investment in renewable energy sources, notably offshore wind, extends its commitment beyond traditional hydrocarbons, aligning with Europe's ambitious green energy targets.
Equinor represents an enticing blend of established expertise in the oil and gas sector and pioneering ventures into the realms of hydrogen and renewable energies. This mix positions Equinor as a key player in the ongoing energy transition, offering a diversified and sustainable investment opportunity within the evolving energy market. Equinor's strategic initiatives in renewable energies and its established presence in the oil and gas sector make it a compelling choice for investors keen on supporting the transition towards a more sustainable and resilient energy future.
BP plc (NYSE:BP) has shaped Europe's energy landscape for decades. In response to the shifting dynamics of global energy consumption and the European Union's ambitious climate goals, BP has strategically expanded its focus towards natural gas and renewable energy sources. This shift is evident in their substantial investments in natural gas infrastructure, including pipelines and state-of-the-art liquefied natural gas (LNG) terminals, aimed at catering to Europe's growing appetite for cleaner fuels. BP's efforts to diversify its energy portfolio reflect a broader industry trend towards decarbonization and energy transition.
Despite the strategic shift towards natural gas and renewables, oil continues to play a crucial role in BP's business model, contributing significantly to its revenue streams. The company has been proactive in adopting more sustainable oil exploration and production practices, investing in technologies that reduce the environmental impact of its operations and enhance production efficiency. These efforts demonstrate BP's commitment to aligning its oil sector activities with global environmental standards and sustainability goals.
BP has recognized the potential of hydrogen as a pivotal element in the future energy mix, particularly for Europe. BP's strategic moves in this direction highlight its vision for a diversified, low-carbon energy future, making it an attractive investment opportunity for those looking to contribute to and benefit from the energy transition.
Shell plc (NYSE:SHEL) has strategically positioned itself within Europe's evolving energy sector by significantly expanding its natural gas and LNG operations. This expansion aligns with the continent's shift towards cleaner energy sources, reflecting Shell's commitment to playing a pivotal role in Europe's energy transition. The company's investments in traditional gas pipelines and state-of-the-art LNG terminals exemplify its strategy to capitalize on changing energy consumption patterns across Europe, enhancing energy security and supporting the shift away from more carbon-intensive fuels.
Oil remains a significant component of Shell's diversified energy portfolio, with extensive exploration, production, and refining operations spread across various geographies. Shell's continuous efforts to optimize these operations incorporate technological innovations and stringent environmental considerations, showcasing the company's commitment to reducing its carbon footprint while ensuring the reliability and efficiency of its oil supply chain.
Shell's proactive approach to sustainability, investment in renewable energy sources, and commitment to technological innovation make it an attractive proposition for those looking to invest in a company that is actively shaping the future of energy.
Birchcliff Energy Ltd. (TSX:BIR) has established itself as a significant player in the Canadian oil and natural gas sector, primarily focusing on exploiting the vast potential of the Montney/Doig Resource Play. The company's strategic emphasis on this premier resource play has driven substantial production and reserve growth, reinforcing Birchcliff's reputation as a low-cost producer capable of optimizing returns even amid fluctuating market conditions. This focus on operational excellence and cost efficiency is central to Birchcliff's business strategy, enabling sustainable growth and competitive advantage.
Birchcliff's commitment to sustainability and responsible development forms the bedrock of its operations. The company actively pursues environmental stewardship initiatives aimed at minimizing its ecological footprint, ensuring the safety and efficiency of its operations, and fostering positive community relations.
Enerplus Corporation (TSX:ERF) exemplifies the dynamism of a diversified North American energy producer, with a presence that stretches from the United States to Canada. Central to its strategy is the pursuit of organic growth within its core areas, particularly in the Bakken/Three Forks formations in North Dakota, renowned for their high-quality light oil assets. This focus is not just a testament to Enerplus's operational prowess but also to its commitment to achieving growth through operational efficiency and cost management.
The company's philosophy extends beyond mere production; Enerplus is deeply invested in sustainable and responsible resource development. By integrating technologies and practices aimed at minimizing the environmental impact and enhancing operational safety, Enerplus sets a standard for the industry.
Vermilion Energy Inc. (TSX:VET) distinguishes itself with a broad international presence, spanning North America, Europe, and Australia. This diversified operational approach enables Vermilion to optimize its production mix, leveraging global pricing dynamics to its advantage. The company's commitment to strong operational and financial performance is evident in its strategic acquisitions and efficient resource management.
Environmental stewardship, community engagement, and safety are pillars of Vermilion's operational ethos. These commitments drive the company to minimize its environmental impact and invest meaningfully in the communities where it operates, fostering sustainable development and enhancing corporate reputation.
MEG Energy Corp. (TSX:MEG) specializes in the sustainable development and production of oil sands in Alberta, Canada, showcasing a commitment to enhancing operational efficiency and environmental performance. Through the adoption of technological innovations like its proprietary HI-Q® technology, MEG Energy strives to lower costs and enhance resource recovery rates, all while prioritizing responsible development. The company's efforts to reduce greenhouse gas emissions and water usage underscore a deep-rooted commitment to environmental sustainability.
Centered on maximizing the value of its significant oil sands assets, MEG Energy's strategy emphasizes financial discipline and operational excellence. The robust production base, coupled with initiatives aimed at reducing costs and improving operations, positions MEG Energy to generate substantial free cash flow.
Whitecap Resources Inc. (TSX:WCP) operates as a growth-oriented oil company, focusing on the acquisition and development of conventional oil and natural gas resources in the Western Canadian Sedimentary Basin. The company's strategy is built on creating sustainable shareholder returns by marrying a disciplined acquisition approach with low-decline assets and a focus on operational efficiencies.
Whitecap's commitment to environmental stewardship, coupled with its efforts to maintain strong governance practices and foster positive community relations, positions the company as a leader in responsible energy development.
By. Tom Kool
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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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