A STRATEGIC review undertaken by Australian oil and gas company Calima Energy Limited has identified a number of new opportunities to support its proposed development of its large land-holding in the hydrocaron rich Montney play in Canada.
Calima, which is targeting becoming a gas and condensate producer within the next six months, has identified more than C$70 billion (approx. A$72 billion) of proposed infrastructure investments potentially adding more than 8 bcf per day of new gas pipeline capacity in the Montney area.
“Calima is fast approaching the point where it will be drilling its first wells on the Calima Lands and it was therefore considered prudent to review the factors affecting the market both in terms of price and ease of access to infrastructure,” Calima Energy managing director Alan Stein said.
“The analysis confirms our belief that the introduction of new pipeline capacity and new markets should have a positive impact on regional gas prices and the increased demand for diluant by the heavy oil producers should result in premium pricing for Montney condensate being maintained in the future.
“With a positive outlook on infrastructure and its flow-on effect on pricing, this is an exciting time to be bringing the Calima Lands towards production,” Mr Stein said.
The Montney Formation currently produces 7 bcf/d of gas, which is 40% of Canada’s total production.
In the short term (over the next 2-3 years) investments of C$7 billion (~A$7.2 billion) in upgrades of existing pipeline and new pipelines will add 3.8-4.3 bcf/d of capacity.
In addition to increased access to US and Canadian gas markets through expanded pipeline capacity, the construction of LNG terminals on Canada’s west coast will allow Montney gas to reach international markets for the first time. Shell and partners are scheduled to reach FID on a C$40 billion (A$41 billion), 13-26mtpa LNG project in October 2018. This project alone will consume an additional 2.5 bcf/d when operational with the capacity to expand up to 5 bcf/d.
Additional gas export capacity is expected to result in increased gas prices. This is reflected in the AECO vs Henry Hub differential strip (Figure 2) which shows the discount reducing progressively over the near term. The differential strip predicts a doubling of AECO gas prices over the next two years, which should have a significant impact on most Montney producers.
The Calima Lands lie within the liquids-rich zone of the Montney Formation.