According to the British Columbia Oil & Gas Commission’s 2016-17 Annual Report, nearly 75 percent of BC’s 1.6 trillion cubic feet of natural gas production came from the BC side of the Montney Basin that stretches across northwestern Alberta and northeastern British Columbia. As reported by the Financial Post, according to National Energy Board estimates, as a whole, “the basin holds around 449 trillion cubic feet of marketable natural gas, just under half of the country’s total natural gas resources.”
Recent years have seen technology breakthroughs that have led to significant improvements in well-productivity and lower operating costs. This allowed for production to increase in 2016 even despite fewer new wells being drilled during that year’s world wide energy downturn. Drilling activity, however, skyrocketed in 2017 with a record number of new wells drilled, with over 370 wells rig released. The surge in drilling activity lead to a 26 percent increase in overall gas production compared to the previous year. At the end of 2017, total gas production in the BC’s Montney south of the Peace River totalled approximately 2.9 Bcf/d (billion cubic feet per day). Encana alone drilled 50 wells during 2017, while Veresen lead processing expansion by completing construction of their Tower, Sunrise, and Saturn facilities, adding 1 Bcf/d of processing capacity. The first part of 2018 promises to see further production increases with around 200 newly drilled wells still waiting to come online (as of February 2018).
Getting “Super Liquids Rich” in the Montney
The majority of the growth and investment in the Montney Basin in the last several years is thanks in large part to it’s “Super Liquids Rich” composition. BMO Capital Markets stated back in 2014 that “the premium value given to natural gas condensates (C5+) provided a new driver for development and high rates of return” for producers in the area. This and other natural gas liquids (such as propane) extracted during drilling and processing make for profitable economics for operators in the area, even in the face of low natural gas commodity prices. As proof of the economics, 2017 saw producers in the region more than double condensate production compared 2016.
Currently proposed export facilities and infrastructure will create significant marketing potential for both the condensate and propane commodities produced in the Montney Basin. Major crude oil export pipeline projects proposed and under construction will continue to increase demand for the condensates required for thinning Northern Alberta’s heavy bitumen for pipeline transport.
Opportunities abound for downstream marketing of propane as well with the AltaGas Ridley Island Propane Export Terminal and Pembina’s Prince Rupert Export Terminal scheduled to go into production in 2019 and 2020 respectively. The two facilities will provide over 60,000 bbl/d of export capacity.
LNG Canada stated in 2017 that they are working toward making a positive final investment decision in 2018 to build their $14 billion liquified natural gas facility and export terminal on BC’s west coast. The proposed facility will be able to liquify between 1.5 and 3.1 Bcf/d of gas, largely sourced from the Heritage Montney area surrounding Dawson Creek. With current production capacity in the region at 2.9 Bcf/d, a positive investment decision from LNG Canada would be sure to result in a further surge in exploration, processing, and transportation capacity for the region. And with world demand for LNG predicted to outpace supply within a decade, further growth in economic activity for Dawson Creek is more likely than ever.
With each well drilled, gas plant commissioned, and compressor station built, long-term, well-paying jobs are secured for local service, transportation, construction, and hospitality industries. And it’s these industries, along with the rest of the spin-off economic activity, that are sure to keep Dawson Creek thriving and vibrant for decades to come.
Sources: BMO Capital Markets, naturalgasintel.com, The Financial Post, Northwest Institute for Bioregional Research
Air Liquide operates an Air Separation Unit (ASU) in Dawson Creek. The plant, which was completed in 2012, supplies liquid nitrogen to oil and gas producers to support drilling operations and increase the oil and/or natural gas recovery rate. Upon opening, the facility employed three full-time operators as well as drivers, for a total of 10 permanent jobs. Phase two of the plant is expected to be operational in 2013.
ARC Resources Ltd
ARC’s assets in northeast British Columbia are located in the tight gas Montney resource play. The Montney is recognized as one of the best tight gas plays in North America, and ARC’s land holdings in the region are world class. ARC was an early entrant in the Montney, and pioneered the use of multi-stage fracturing for horizontal completions; a technology that has proved instrumental in unlocking the play.
Today, ARC is the third largest operator in the region and through its expertise has expanded its land holdings to almost 1,000 net sections. Key areas include Dawson, Parkland/Tower and Sunrise. The Montney is a key growth area with great potential for continued reserves and production additions. ARC is positioned to meaningfully grow gas and liquids (propane, butane, pentane) production in the near-term.
Natural gas exploration and development in the Dawson Creek and south Peace region of B.C. has increased the demand for clean, reliable electricity. The Dawson Creek/Chetwynd Area Transmission (DCAT) project will help to meet the demand by doubling the system capacity in the area. Included in the project are a new substation, expansions to two existing substations, and two new transmission lines.
In mid-November 2013, construction began on the DCAT transmission line, with the start of right-of-way clearing and access road construction. The project is expected to be completed in 2015, with an estimated in-service date of March 2016.
BC Oil & Gas Commission
The BC Oil and Gas Commission is an independent, single-window regulatory agency with responsibilities for overseeing oil and gas operations in British Columbia, including exploration, development, pipeline transportation and reclamation.
The Commission’s core roles include reviewing and assessing applications for industry activity, consulting with First Nations, ensuring industry complies with provincial legislation and cooperating with partner agencies. The public interest is protected through the objectives of ensuring public safety, protecting the environment, conserving petroleum resources and ensuring equitable participation in production.
Regulatory responsibility of the Commission extends from the exploration and development phases, through to facilities operation and ultimately decommissioning. It is charged with balancing a broad range of environmental, economic and social considerations.
Calfrac Well Services Ltd.
Calfrac Well Services is an Alberta-based pressure pumping company that continues to increase its presence in the Dawson Creek area. It specializes in fracturing, coiled tubing and other well stimulation services designed to increase production of hydrocarbons from wells. Calfrac has an existing 20,600 sq. ft. chemical storage and wash bay facility located in the Hansen subdivision on the west side of Dawson Creek. They continue to expand with plans for further development of their 40 acre parcel, including a maintenance facility and office spaces, in 2014.
Canadian Natural Resources Limited (CNRL)
Canadian Natural is one of the largest holders of undeveloped land in British Columbia. Along with lowering and controlling costs, this land position combined with extensive infrastructure allows for low cost entry into the overheated market for natural gas resources, most notably in the Montney shales. The progress they have made in the Deep Basin Lower Doig/Montney play continues into the Northeast British Columbia Montney project at Septimus, which is now in the first phase of production. The Company will maximize its cost effective position by integrating the data with the right technology, and acquiring new land and assets that fit existing infrastructure.
An operator in the Peace region since the 1990s, Encana Corp. has facilities near Dawson Creek, Farmington, Tomslake and Pouce Coupe. The company is committed to the communities where their employees live and work. Encana gives back to communities through three funding pillars: environment, education and community life.
Encana has growth assets in the Montney area. These liquids rich and oil assets offer high returns, are comprised of high quality rocks, have significant running room and scale and create portfolio optionality. In addition to their core growth assets, Encana holds a significant collection of base and option value assets located throughout North America, including assets in the Horn River basin. Optimizing base production is another critical component of Encana’s operating and growth strategy.
Ferus Inc. is a privately-held Canadian company providing integrated solutions to the energy industry for well stimulation, well completions and enhanced oil recovery applications. Over the past few years, Ferus has invested in excess of $45 million in the Dawson Creek area through the construction of two liquid nitrogen facilities along with the associated transportation and storage equipment. During construction of its facilities, Ferus created 60 full time jobs in the region and carries on operations today with nearly 20 permanent staff working in the Dawson Creek area.
Murphy Oil teams worldwide are busy growing its reserves, adding value for its shareholders and providing jobs and economic stimulation to the communities in which they operate. They are engaged in crude oil and natural gas exploration and production in Western Canada. In the Montney tight gas resource play, they produce gas at their Tupper and Tupper West facilities. These plants serve the combined several hundred wells that are being drilled in the surrounding areas, and are connected to the plants via gas gathering system pipelines. Wells drilled in these areas use horizontal multi-stage fracturing technology.
Pengrowth is working towards their goal of becoming a sustainable energy producer through non-conventional energy projects. While investing in new thermal oil projects, they continue to maintain conventional oil and gas assets, such as those found in the Montney/Groundbirch areas. The Montney formation is one of the most economic gas resources plays in North America. Pengrowth has greater than 50 gross sections of Montney land with liquids content (C3+) ranging from 0-75 bbl/MMcf.
Progress Energy operates within some of the premier areas of the Western Canadian Sedimentary Basin, including the Foothills of Northeast British Columbia. Focusing on the exploration of tight gas and Montney shales/silts, Progress has a growing reserve base of proved plus probable reserves and maintains a material land position in natural gas resource plays.
Shell collaborated with the City of Dawson Creek to build a reclaimed water facility that virtually eliminates the need to draw on fresh water for their operations in the area. The multi-million dollar facility provides a new source of revenue for the City of Dawson Creek as well as additional water for industrial and municipal uses.
Shell Groundbirch includes facilities for gas processing, water and fluid handling, 900+ kilometres of pipeline, four active drilling rigs and over 300 wells, which produce over 330 million standard cubic feet of raw gas per day (mmcfe/d).
Driven by the continued development of the Montney play, Spectra Energy built the Dawson Processing Plant to process raw natural gas from the South Peace region to meet the scale, scope and timing of their customers’ processing needs. The project involved the construction of a double train gas processing plant featuring inlet separation, compressor facilities, a vapour recovery unit, and a radio communications tower. Raw natural gas is processed at the plant, meaning that CO2, natural gas liquids and H2S are extracted. The processed sales gas are transported via a short connector to the NGTL Groundbirch Pipeline.
Spectra Energy and its partner company, BG Group, propose to build a 850-kilometre (525 mile) natural gas system originating from northeastern B.C. to serve BG Group’s potential liquefied natural gas (LNG) export facility in Prince Rupert, on the province’s northwest coast.
The project will provide the required natural gas transportation capacity to meet the demands of a proposed LNG terminal on B.C.’s West Coast, in keeping with B.C.’s Jobs Plan and its goal of establishing LNG facilities by 2020. The project also will connect with the Spectra Energy system at Station 2 (southwest of Fort St. John), a growing natural gas hub that collects supply from multiple areas of the province and other supply basins in Western Canada.