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, for producers in the area, “the premium value given to natural gas condensates (C5+) provided a new driver for development and high rates of return.” 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