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Montney play the exception
The Montney tight gas play in northeastern British Columbia could be one of the exceptions in 2009 — a region that will see more, not less activity, said John Dielwart, president of ARC Energy Trust.
But he said the consequence is that costs are not likely to ease up in the area as the activity level climbs above 2008 when Royal Dutch Shell arrived on the scene.
Speaking to a BMO Capital markets unconventional gas conference in New York, Dielwart said ARC now has an identified resource of 8.1 trillion cubic feet — 3.5 tcf in its Dawson field (the trust’s main producing property in the Montney) and 4.6 tcf in its West Montney acreage.
The trust entered the play six years ago when it acquired privately owned Star Oil & Gas for C$710 million, operated the first wells drilled into the play and in 2005 completed the first horizontal well.
Dielwart said ARC believes there are other prospective horizons “where we fully expect to see significant additional gas discovered.”
Key question recovery The key question now is how much of the resources can be recovered. For ARC, 2 tcf of gas-in-place at Dawson has been assigned reserves at an average recovery rate of 25 percent, he said.
Dielwart believes ARC can achieve an ultimate recovery factor of “well in excess of 50 percent” and other Montney operators are talking about 60-65 percent.
With 25 percent currently booked, ARC is counting on at least another 500 billion cubic feet, or just short of 100 million barrels of oil equivalent of reserves in the drilled-up area of Dawson alone.
He said only a token amount of reserves have been assigned in West Montney, including the trust’s Sunrise discovery which tested at more than 10 million cubic feet per day after it was drilled more than a year ago.
Even if ARC is limited to recovering 25 percent of the gas-in-place that will still double its reserves over the next several years, Dielwart said.
Since buying the Dawson property, the trust has seen its output grow from 20 million to 45-50 million cubic feet per day and aims to build its Montney volumes to 170 million cubic feet per day and has a “very conservative” recoverable resource target of 300-350 million cubic feet per day, he said.
Dielwart said ARC’s 2009 budget of C$170 million in the Montney includes completion of a 60 million cubic-foot-per-day gas plant this quarter.
He said Montney reserves are being added for about C$1.50 per thousand cubic feet, while per-well costs were cut to about C$5 million last year from C$8 million in 2005; but as wells become deeper, the fracturing work increases, bumping costs up to C$5 million-$6 million.
However, Dielwart cautioned that although the Montney is “very low exploration risk in terms of finding gas,” there’s no guarantee that every well can be economic, despite what some companies claim.
He said gas prices can drop below C$5 per thousand cubic feet and ARC can “still have very, very attractive prospects.”
—Gary Park
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