• Drilling and testing permit granted for the Welchau-1 gas exploration well, targeting 807Bcf of natural gas
  • Located right in the heart of gas-hungry Europe and proximal to existing gas pipelines
  • The well is up dip from the historic Molln-1 well, which tested pipeline quality gas in 1989 in the reservoirs targeted by Welchau
  • Drilling operations are expected to commence during the fourth quarter of 2023 after receipt of an environmental clearance

 

The way is nearly clear for ADX to drill the key Welchau-1 gas exploration well after it was granted the key drilling permit from the Austrian government.

The award of the permit, which allows the company to not only drill and test the well but also to carry out a  longer-term production test if required.  The drilling permit follows the submission of drilling program documentation, expert opinions, and a public hearing at the Welchau drill site, which returned no major objections.

So why is ADX Energy (ASX:ADX) so keen to drill Welchau-1?

The target reservoir hosts a best technical Prospective Resource of 807 billion cubic feet of gas equivalent, in relatively shallow reservoirs updip from the nearby Moln-1 gas discovery, that intersected a gas column of at least 400m in 1989 and flowed 3.5 million cubic feet of gas per day during testing.

The fact that this potential resource is situated at the center of energy-demanding Europe and in close proximity to established gas pipelines makes it a rare opportunity for ADX and Austria.

“The Board of ADX is very impressed and encouraged by the transparent and efficient permitting process conducted by the Austrian Mining Authority for evaluating extensive technical, legal and environmental documentation, as well as openly addressing relevant stakeholder and community interests,” executive chairman Ian Tchachos noted.

“The Welchau exploration project is an exceptional domestic energy supply and economic opportunity for the State of Austria.”

 

A major gas opportunity

Welchau is located within the thrust belts of the Northern Calcareous Alps portion of the ADX-AT-II license to the south of the company’s producing Anshof oil field.

The target Triassic Steinalm Formation – a fractured carbonate reservoir trapped in a trending ramp anticline with more than 20 km lateral extent and 100km2 maximum closure area – is also relatively shallow, meaning that the well would only be drilled to a planned depth of about 1,900m, which will result in lower costs compared to deeper wells.

Adding interest, the proximity to the Moln-1 well, which produced gas from the same reservoir, is a strong indicator that an active hydrocarbon system is present.

ADX is also responsible for just half of the drill costs under the terms of a farm-out agreement with MCF Energy, which is funding 50% of its costs for a 20% interest in the field.

Under the terms of the drilling permit, ADX can drill the Welchau-1 well at any time during the term of the exploration license providing it is drilled during a period between 1 October to 31 March.

 

Feeding European gas demand

While European gas demand has eased earlier due to warm weather during the  2022 winter, the prevailing gas prices during this European summer are still substantially higher than historical gas prices. Recently , the potential for disrupted liquefied natural gas supply from Australia due to potential strike action has sent gas prices surging.

Despite the fact that Australian LNG rarely gets shipped to Europe, this underscores the continued uncertainty about gas supplies, which is in turn due in no small part to Europe weaning itself off Russian gas but becoming increasingly dependent on expensive, imported LNG.

Should ADX find a substantial source of gas with Welchau-1, it will certainly have no concern about finding offtake partners keen to pick up a reliable, local source of gas in preference to imports.

 

Environmental approval pending

ADX is now awaiting receipt of an environmental clearance. This final stage of the permitting process is based on the evaluation of an environmental report by a government nominated expert which has been completed and submitted to the local Upper Austrian governing body.

It will also include a stakeholder hearing period as was the case for the drilling permit process.

Drilling operations are expected to begin during the fourth quarter after receipt of the environmental clearance.

 

 

This article was developed in collaboration with ADX Energy, a Stockhead advertiser at the time of publishing.

 

This article does not constitute financial product advice. You should consider obtaining independent advice before making any financial decisions.

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