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Charles Kennedy

Charles Kennedy

Charles is a writer for Oilprice.com

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Europe’s Secret Weapon In Its Energy War With Russia

pipelines

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.

The general consensus from German industry and the government is that fossil fuel expansion is still necessary—both for longer-term energy security and, with respect to natural gas, to act as a bridge for the energy transition. 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.

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 (TSXV:MCFOTC:MCFNF) 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 11th 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. The initial exploration results tested condensate rich for pipeline quality gas.

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, and a nearby historic gas discovery.

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 (TSXV:MCFOTC:MCFNFwill 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 resources are similar to other gas fields in northern Germany with nitrogen also present. MCF also disclosed that the gas in Reudnitz's 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 fourth concession in Germany is Erlenwiese, for which 2D seismic has been acquired and is being reprocessed, with 3D on the way, along with AI analysis. 

The five prospects—in addition to a proprietary database of 10 additional project areas--were acquired when MCF Energy acquired 100% of German Genexco last 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 (TSXV:MCFOTC:MCFNFbelieves 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. 

In our view, the timing is right, especially for natural gas, which Europe has reclassified as sustainable. 

In July last year, EU lawmakers voted in favor of calling both natural gas and nuclear power “green” or “sustainable” sources of energy, effectively unlocking billions of dollars in private investment and state subsidies for new projects. The justification for classifying this methane-based fossil fuel as “sustainable” is due to its critical role as a bridge fuel for transitioning to renewable energy. In other words, it’s far cleaner than coal and the least damaging fossil fuel to enable a smooth transition to renewables. 

And risk abounds, in the face of no domestic sources of gas. The LNG supply line is being threatened by a pause on new projects from Washington, and the Red Sea is under attack by the Houthis, threatening to cut off shipments or push prices higher.

Against this backdrop, Germany is the prime staging ground for this new bridge fuel investment push, and MCF Energy is just weeks away from drilling and re-entry at Lech, with a CEO that is confident of a hit.

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. The company's advanced technological offerings, including hydraulic fracturing and shale gas production technologies, align perfectly with Europe's stringent environmental standards and growing emphasis on energy security.

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. This not only leads to enhanced operational efficiency and reduced costs but also significantly lowers the environmental impact of drilling activities, resonating with Europe's ambitious environmental goals. Halliburton's ability to offer more precise, efficient, and sustainable services positions it as a vital partner to the European energy sector, addressing both current needs and future challenges.

Halliburton's strategic positioning and technological prowess in Europe represent a unique opportunity. The company's commitment to innovation, coupled with its alignment with Europe's energy and environmental objectives, makes Halliburton a compelling investment choice.

Schlumberger Limited (NYSE:SLB), as the premier provider of technology and services to the global oil and gas industry, plays an instrumental role in enhancing the efficiency and sustainability of Europe's energy sector. With a vast array of innovative technologies for reservoir characterization, drilling, production, and processing, Schlumberger supports Europe in maximizing its energy recovery, streamlining costs, and improving the environmental performance of oil and gas operations. The company's unwavering commitment to research and development ensures it remains at the cutting edge of the energy transition, providing solutions that significantly boost the sustainability and productivity of the oil and gas industry across the continent.

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.

Schlumberger's proactive stance on sustainability, combined with its strategic focus on the European market, offers a compelling narrative for growth and resilience. The company's ability to adapt and innovate in response to the evolving energy landscape makes it a prime candidate for those seeking investment opportunities in a company driving the future of the global 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. As a leader in the energy sector, renowned for managing the world's most extensive crude oil and liquids transportation system, 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 in Europe. These initiatives are part of a broader strategy to reduce greenhouse gas emissions and support the integration of renewable energy, highlighting Enbridge's commitment to sustainability and environmental stewardship.

By leveraging its expertise in energy infrastructure and actively participating in the development of renewable energy and CCUS projects, Enbridge is not only contributing to reducing the environmental impact of energy systems but is also enhancing energy security and sustainability in Europe and beyond.

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, thereby enhancing the continent's energy resilience. Europe's strategic move towards a greener energy mix, emphasizing reduced carbon emissions, aligns with Golar's initiatives to make LNG shipping more environmentally sustainable.

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. Golar's LNG carriers and floating storage and regasification units (FSRUs) offer a cleaner alternative to traditional energy supplies, supporting Europe's transition to a low-carbon economy.

Golar LNG presents a strategic entry point into the dynamic LNG market, where environmental sustainability and innovative energy solutions drive future growth and demand, particularly in energy-conscious markets like Europe.

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.

As Europe continues to explore offshore resources to secure its energy supply, Transocean's capabilities and technological advancements become increasingly valuable. The company's focus on safety, environmental protection, and operational excellence makes it an attractive partner for European energy projects aiming to balance resource development with environmental stewardship.

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As Europe seeks to diversify its oil imports amid global market fluctuations, companies like Imperial Oil Limited  (TSX: IMO), known for their efficient and environmentally responsible production methods, could see increased demand for their products. The company's focus on innovation, as demonstrated by its solvent-assisted steam injection technology, positions it as a leader in reducing the environmental impact of oil sands extraction, aligning with European consumers and regulators' growing emphasis on sustainability.

Imperial's commitment to shareholder returns, coupled with its strategic initiatives to increase production while lowering emissions, presents a compelling narrative for investors. As Europe continues to adapt its energy policies in favor of more sustainable and secure sources, Imperial's forward-thinking approach and operational excellence could make it an attractive option for European markets seeking high-quality, environmentally conscious oil imports.

Pembina Pipeline corp. (TSX:PPL) has diversified portfolio of pipeline and storage facilities, making it a pivotal player in North America's energy infrastructure. While its operations are primarily based in Canada, the global push for cleaner energy sources and the strategic importance of LNG in achieving energy transition goals could see Pembina benefiting from increased demand for its services, including in Europe. The company's involvement in the Cedar LNG project, aimed at exporting LNG to Asian markets, underscores Pembina's capacity to contribute to global LNG supply chains, potentially impacting European energy markets indirectly through global LNG market dynamics.

Pembina's resilience in operations, as evidenced by its strong financial performance and commitment to significant projects like Cedar LNG, signals a robust investment opportunity. As Europe explores alternatives to diversify its energy imports and enhance security, Pembina's infrastructure and export capabilities could become increasingly strategic, positioning it as an integral player in the international energy market.

Arc Resources Ltd. (TSX:ARX) as a prominent Canadian energy producer, is well-aligned with the global shift towards more sustainable and responsible energy production practices. While Arc's operations are focused in Canada, its commitment to reducing its carbon footprint and implementing innovative environmental practices holds indirect benefits for Europe's energy sector, especially as global markets increasingly favor producers that prioritize sustainability. Europe's stringent environmental standards and commitment to reducing emissions could drive preference for energy imports from companies like Arc, known for their responsible production methods.

Arc's active involvement in community and sustainable development initiatives further strengthens its appeal to investors and partners seeking not just financial returns but also positive social and environmental impacts. As European investors and energy companies increasingly look towards sustainable and ethically produced energy sources, Arc Resources presents itself as a forward-thinking company whose values and practices resonate with global energy transition goals, making it an attractive investment for those looking to support the shift towards a sustainable energy future.

Tourmaline Oil Corp. (TSX:TOU), standing as Canada's premier natural gas producer, has dynamically engaged in expanding its influence through judicious strategic acquisitions and focused exploration efforts, underscored by a steadfast commitment to operational efficiency and cost-effectiveness. This strategy has not only broadened Tourmaline's operational scope but has also cemented its position as a vanguard of sustainable growth within the energy sector.

In the context of Europe's energy sector, Tourmaline's commitment to sustainability and its substantial natural gas production capabilities position it as a potentially key player in supporting the continent's transition to greener energy sources. With Europe increasingly looking to diversify its energy imports amidst a global push for environmental sustainability, Tourmaline's eco-conscious approach to natural gas production could see it becoming an attractive supplier to European markets seeking to reduce carbon emissions and secure reliable, cleaner energy sources.

Precision Drilling Corporation (TSX:PD) distinguished as a leader in providing high-performance drilling and completion services, caters adeptly to the modern demands of the global oil and natural gas industry. The company's investment in cutting-edge drilling technologies is a testament to its commitment to operational excellence, efficiency, and safety, aligning perfectly with the industry-wide imperative to minimize environmental impacts while enhancing worker safety across operations.

Precision Drilling's initiatives aimed at sustainability, notably through the reduction of emissions and the implementation of advanced energy-efficient systems, underscore the company's proactive stance on environmental stewardship and its alignment with the broader shift towards sustainable energy production practices.

By. Charles Kennedy

**IMPORTANT! BY READING OUR CONTENT YOU EXPLICITLY AGREE TO THE FOLLOWING. PLEASE READ CAREFULLY**

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.

DISCLAIMERS

This communication is for entertainment purposes only. Never invest purely based on our communication. We have not been compensated by MCF Energy Ltd. for this article. While the opinions expressed in this article are based on information believed to be accurate and reliable, such information in our communications and on our website has not been independently verified and is not guaranteed to be correct. The content of this article is based solely on our opinions which are based on very limited analysis and we are not professional analysts or advisors.

SHARE OWNERSHIP. The owner of Oilprice.com owns shares of MCF Energy Ltd. and therefore has an incentive to see the featured company’s stock perform well. The owner of Oilprice.com will not notify the market when it decides to buy more or sell shares of MCF Energy Ltd. in the market. The owner of Oilprice.com will be buying and selling shares of this issuer for its own profit. Accordingly, our views and opinions in this article are subject to bias, and we stress that you should conduct your own extensive due diligence regarding the Company as well as seek the advice of your professional financial advisor or a registered broker-dealer before you consider investing in any securities of the Company or otherwise. 

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  • Mamdouh Salameh on March 12 2024 said:
    Europe has decisively lost the energy war with Russia. Therefore, Europe is left with two courses of action. The first is trying to recover some left gas from old gasfields with new technology. This mostly looks good on paper than actual.. The second is resuming imports of both the cheaper and plentiful Russian piped gas and LNG once the Ukraine conflict is settled peacefully. This is the rational and practical course of action for Europe to prevent its economy collapsing by its imports of the expensive US LNG. But for this course of action to succeed, Europe has to stand up to the United States and look after its own economic and strategic interests.

    Without Russian gas supplies, Europe's largest economy will be forced to continue importing the high-priced LNG imports mostly American LNG, delay nuclear power phaseout, and even restart dormant coal plants as happened during the 2021 European energy crisis. The outcome will definitely be a German-led European economy facing collapse.

    The loss of the energy war with Russia has taught German industry and the government that fossil fuel expansion is still necessary for longer-term energy security. Another lesson is that Russian gas is quintessential for building German and European economies.

    The argument that it is better for Germany's and Europe's energy security not to be dependent on Russian gas has already been undermined if not crushed by their dependence on US LNG with their economies in the doldrums.

    Dr Mamdouh G Salameh
    International Oil Economist
    Global Energy Expert

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