We interviewed James Hill, CEO of MCF Energy (TSXV: MCF), to offer his perspective on what’s shaping up to be a potentially demanding year for oil and natural gas. Geopolitics is the acclaimed initiator of this trajectory, as Russia’s continued attacks on Ukraine and the Israel-Hamas conflict both press on with no clear end in sight.
Many feel that the current ‘stalemate’ with Russia is deceptive and that Ukraine could potentially fall apart, given the region does not have enough international aid.
This puts Europe in a rather uncomfortable position. Europe heavily relies on Ukraine for its energy storage. It is the largest holder of Europe’s gas supply, meaning the continent could once again be at great energy risk.
It is not a surprise that much of Ukraine’s potential energy resources are located in the eastern part of that country which Russia now tries so hard to control.
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What can we expect to see for the energy markets in 2024?
James Hill: Entering 2024, a new reality for energy is emerging.
Natural gas was the worst-performing commodity in 2023, experiencing a decline of nearly 50% last year. In part, because, for the better half of 2023, a push toward an accelerated use of renewables was championed from just about every angle. Now, what seems more likely is an energy expansion, rather than a transition.
In fact, many are predicting we are at the start of the next energy supercycle. JP Morgan’s latest research, as of November 2023, reveals that supply sources outside of OPEC are reaching their limits, leaving the alliance to meet rising demand and therefore, potentially deplete what’s currently remaining.
With the conflict between Russia and Ukraine also entering its third calendar year, Europe is working fervently to free itself from Russian LNG, which, at the earliest, could happen sometime in the next 12 months. In the interim, Ukraine is playing a key role in central and eastern Europe’s security of gas supply and currently holds more gas storage capacity than any country in the EU.
If Europe does manage to free itself from Russian LNG, what will this mean for European energy? What about Global Energy?
James Hill: If Russian liquid natural gas is phased out of Europe completely, we can expect upward pressure on European gas prices.
As well, pipeline flow will need to be rerouted to ensure landlocked countries have access, which should be doable once infrastructure such as the planned LNG import terminals across Europe are in place.
However, despite what seems to be a risk-free trajectory, analysts continue to warn that there is risk to the region’s security of supply, coming from heightened near-future demand.
We saw what heightened demand did at the onset of the war, not just to Europe, but to the global energy markets. The current Israel-Hamas conflict caused oil prices to rise 7% within a week despite no immediate threats to supply. Being stagnant is not an option.
Are increasing imports the only way to curb potential pitfalls?
James Hill: No. Europe labeled natural gas as ‘green’ last year and, as a result, opened the gates to domestic energy production within Europe, which is now going to ramp up to support Europe’s long-term energy future.
There are companies like MCF Energy (TSXV: MCF) who are pressing forward with domestic oil and natural gas exploration within key areas of Western Europe, such as Austria and Germany, to help alleviate future pressure and demand.
Domestic gas production can also reduce Europe’s carbon footprint by up to 30%, help the region control costs and ensure supply.
Europe shut the door on domestic oil and natural gas production for decades, which is why it fell dependent on Russia. After suffering such dire consequences, taps have turned back on with a renewed focus on clean oil and natural gas production.
What assets does MCF Energy hold?
James Hill: MCF Energy has projects ongoing in Germany and Austria.
Later this year, MCF Energy’s investment partner and operator ADX plans to spud Welchau-1, a potentially transformational well in Austria that has exceptional gas resource potential.
This is because it is estimated to host technical prospective resources of 807 billion cubic feet of gas equivalent in the same reservoirs as the nearby Moln-1 well, which tested condensate-rich gas in 1989.
This could significantly contribute to the European grid. In Germany, MCF Energy is using AI and Machine Learning technologies to help in the search for significant resources in-country and has firm plans to drill in Q1 of this year.
In Germany, LNG-to-Grid connections are anticipated to cost $4.8B. An expense Germany cannot truly afford, given last year, the country was named “the world’s worst-performing developed country.” It is not in an economically sound position. Domestic natural gas production here can reduce the need for alternative supply routes, cut costs, and increase independence.
This will take time, but many are recognizing that this is the best way to safeguard its future. MCF Energy has acquired several location sites where it plans to drill targets, based on historical data, and that could provide Germany and the European grid with a potentially substantial amount of natural gas.
What are your predictions for the Russian-Ukraine War in 2024?
James Hill: Right now, many consider Russia and Ukraine to be in a stalemate. They are not in a stalemate. There’s too much on the line for Ukraine. And if what’s next for them is defeat, it could be a proxy for bigger and more aggressive action from Russia.
Ukraine currently holds more natural gas supply than any other country in the EU. With a critical amount of supply held here, all of Europe needs to be ready, and without adequate international aid on the ground in Ukraine, it would be imprecise not to prepare for the worst.
Jerome Knyszewski, VIP Contributor to ValiantCEO and the host of this interview would like to thank James Hill for taking the time to do this interview and share his knowledge and experience with our readers.
If you would like to get in touch with James Hill or his company, you can do it through his – Linkedin Page
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