Petronas plans 40 years of steady measured development in B.C. Montney

Authors:
Elsie Ross

Date:
December 11/2018

After a hiatus of more than two years, Petronas Energy Canada Ltd. is back in the field in Northeast B.C. as it begins drilling to underpin its share of natural gas for the LNG Canada export project.

However, the former Progress Energy Canada Ltd. has no plans to return to the frenetic pace of 2013-2014 when it was running nearly 30 rigs continuously in the area, Dennis Lawrence, vice-president of production, told a B.C. Montney technical session organized by the Canadian Society for Unconventional Resources (CSUR).

Every single person in Northeast B.C. was running flat out.”

This time around, the pace will be more measured with the company looking at 40 years of steady rational development in Northeast B.C., he said. “That’s better for our business. It allows us to optimize, it allows us to plan properly and it is better, quite frankly, for the communities in which we operate.”

Petronas Canada started with one rig in October of this year and will add a second one at some point in 2019, said Lawrence. It envisions gradually building up to four to six rigs and a couple of hydraulic fracturing spreads for the next 30 plus years as it develops its 60 tcf of recoverable resources.

The company is currently drilling the fourth well on its first “start-up” pad and the second well is already faster than any of its other 600 Montney wells. Current net production is just under 70,000 boe/d and Petronas expects that to double to 140,000 boe/d over the next five years in a measured steady ramp up to an LNG Canada onstream date in 2023/2024.

However, not all Petronas gas from Northeast B.C. will go to the LNG Canada facility, said Lawrence.

“We will be moving a lot of gas out of Northeast B.C. and we have got some of those avenues opened up to us now and we made some commitments but we are not done yet.”

Formed in the early 2000s, Progress Energy spent the following few years acquiring land in Northeast B.C. north and west of Fort St. John and building a land position. In the 2011-2012 period, it shifted to proving the resource and Petronas became involved, first as a joint-venture partner and then as the owner of the company.

Between 2012 and 2015, Petronas was very much focused on delineating the resource with an LNG project clearly in mind as it drilled a grid of wells across the land base.

“We were really figuring out what we had and assessing the quality of the resource across the entire suite of our lands,” said Lawrence.

The company drilled three-mile grid drilling pads with each pad typically having three wells — an Upper, Middle and Lower Montney. The wells were drilled with similar lateral lengths, well designs and completion techniques.

“That was done very deliberately because we wanted to keep as many things as we could the same so you would get a true picture of the quality of the resource across our lands.”

However, what that meant was that while Petronas started with a state-of-the art well design in 2013 and 2014, due to rapid changes in the industry its new wells will be very different from those delineation wells, he said. The current well design is a 2,600 metre lateral with about two tonnes per metre of proppant. Although the company feels that is the “sweet spot,” it will continue experimenting with that, the session heard.

Petronas also has begun construction of two gas plants in the heart of its Montney lands and significant pipeline infrastructure needed to connect those plants with some of its existing compressor stations.

In the wake of lower natural gas and LNG prices, the company paused between 2016 and 2018 to reset its strategy, figuring out how it could monetize its resources. Petronas had been working on its own LNG plant at Prince Rupert but opted not to proceed, deciding instead to participate as a partner in the Royal Dutch Shell plc-led LNG Canada plant at Kitimat.

“We have pivoted … we are already taking the first steps in that strategy and the LNG Canada investment over the last year or so is a huge first step in that strategy,” said Lawrence.

From 2019 forward, “it’s about executing that strategy and in essence finding ways to monetize that 60 plus tcf resource that we have on our lands.” He also noted that the cost of feedstock is a big part of the overcall cost of LNG and “we only see it going down over time.”

Petronas commitment

According to Lawrence, Petronas is “very, very committed” to Canada with its North Montney position the second largest position in its worldwide portfolio. The company wants to grow its unconventional portfolio and its Canadian assets represent the largest unconventional element in its portfolio, he noted.

Recognizing the need for continued innovation, the Canadians persuaded their parent company to establish an “unconventional centre of excellence” in Calgary. The centre consists of a group of technical experts tasked with finding the next big improvement in well design reservoir understanding technology. Established about a year ago, it is now fully up and running.

“They are looking at everything from rock mechanics, to frac design to flowback to all of the artificial intelligence and learning systems that can go into all of that, all really focused on the supply cost side of the equation,” said Lawrence.

Petronas also believes it can reduce operating costs, the CSUR session heard. The company has a program, the integrated operating model. The group on the production and operations side is focused on making step changes in operating efficiencies, leveraging technology data, artificial intelligence, turning them into a lower operating cost per unit.

“We are well down the path on remote operations, centralized control rooms, piloting some of that stuff and we are certainly looking forward to scaling that up across our entire operation,” he said. “It is clearly the wave of the future and we intend to be part of that.”

Petronas has nearly 1.5 million gross acres in northeast B.C., of which about 900,000 gross acres are Montney rights. It also has about 800 active wells of which just over 600 (about three-quarters) are Montney producers. In addition, the company has four gas plants, 33 compressor stations to feed the plants and about 3,200 kilometres of operated pipeline.

Source:

Authors:

Elsie Ross

Elsie Ross is associate editor of the Daily Oil Bulletin (DOB). Elsie started at JWN in 1997 as a DOB reporter. Prior to that, she spent 15 years at the Calgary Herald as a reporter including the City Hall and education beats (but never business) and later as a copy editor.

At the DOB, her main areas of coverage are midstream and regulatory issues although she also likes good exploration stories (the trick is getting someone to talk about them).


LNG Canada is unlikely to spark a fracking frenzy

Authors:
Nelson Bennett

Date:
October 24, 2018

Groundbirch general manalger Rej Tetrault, left, with Tim Braun, lead operator, at a well pad that has six producing wells | Nelson Bennett

Companies already produce enough natural gas to provide half of LNG Canada’s needs

In unconventional gas production such as horizontal drilling and hydraulic fracturing, about 80% of a new well’s gas comes up in the first three years, before output goes into a long, slow decline.

But these wells can produce gas at low levels for up to 20 years.

Shell Canada already has 500 wells in production in its Groundbirch operations south of Fort St. John, and once the LNG Canada plant and Coastal GasLink pipeline are built, its gas production will shift from east to west. As a 40% partner in LNG Canada, Shell is obliged to supply 40% of the gas.

All of the partners in the LNG Canada partnership, except Korea Gas Corp., have substantial natural gas assets in northeastern B.C. Production from those assets is expected to fill roughly half of LNG Canada’s gas needs for Phase 1, a two-train plant.

In other words, there are significant amounts of natural gas being produced now by the LNG Canada partners that can shift west to Kitimat. The LNG Canada project alone therefore is unlikely to trigger the kind of fracking frenzy that some have predicted.

Starting about two years before LNG Canada’s plant goes into production, Shell expects to bring in its drilling rig. The company expects it will need to drill about 20 to 30 new wells each year over two years to meet additional demand from LNG Canada and to replace production from some of the wells whose production will have declined by then. From then on, the LNG Canada partners will need to drill about 200 new wells per year for the life of the LNG plant.

“Last year, B.C. drilled 608 [wells],” said Chris Montgomery, manager of government and community relations for the Canadian Association of Petroleum Producers. “We need about a third more of that.”

While the LNG Canada project may not spark a drilling bonanza, even a small uptick in drilling provides a substantial amount of investment and jobs, since it is labour-intensive.

Montgomery said two billion cubic feet per day of demand (roughly the demand from LNG Canada’s first phase) would translate into 20,000 direct, indirect and induced jobs in B.C., $500 million in additional revenue to the B.C. government and $3.7 billion in added GDP growth.

That’s just from the upstream activity, and doesn’t include the jobs and revenue from the pipeline and LNG plant in Kitimat.

“Alberta gets a little bit of an uplift, but most of the uplift from LNG production comes from here in British Columbia,” Montgomery said.

Source:

Authors:

Nelson Bennett

Business in Vancouver resources reporter.


$40B LNG project in northern B.C. gets go-ahead

Source:
CBC.ca

Authors:
Rhianna Schmunk

Date:
October 2, 2018

Construction is going ahead on a massive, $40-billion liquefied natural gas project in northern B.C., hours after five primary investors from five different countries granted their approval for the joint venture.

The LNG Canada project will see a pipeline carrying natural gas from Dawson Creek in northeastern B.C. to a new processing plant on the coast in Kitimat. There, the gas would be liquefied for overseas export.

The partners came to their decision at 9:18 p.m. PT on Monday. They are:

  • Royal Dutch Shell.
  • Mitsubishi Corp.
  • The Malaysian-owned Petronas.
  • PetroChina Co.
  • Korean Gas Corp.

A rendering of the proposed liquefied natural gas project in northern B.C. shows the processing terminal in Kitimat. All five primary investors have signed off on the project. (LNG Canada/Flickr)

On Tuesday, LNG Canada CEO Andy Calitz said the company is “immediately, today, moving into construction” on the pipeline and plant.

He said project has already obtained all the necessary approvals to break ground, including from the National Energy Board, Department of Fisheries and Oceans, BC Hydro as well as 25 First Nations.

Prime Minister Justin Trudeau announced a new 40 billion dollar liquefied natural gas project that will transport natural gas from Dawson Creek in northeastern B.C. to a Kitimat processing plant. 1:11

Prime Minister Justin Trudeau said the announcement represents the single largest private sector investment in Canadian history.

“Today is a good day,” he said Tuesday.

Political, First Nations leaders react

Trudeau, B.C. Premier John Horgan and other leaders held a news conference to make the official project announcement in Vancouver on Tuesday morning.

“It’s certainly a great day for northern British Columbia,” Horgan said.

“I can’t tell you how proud I am. I can’t stop smiling.”

B.C. Premier John Horgan speaks at the official announcement around the approval of LNG Canada’s joint venture project in B.C. (CBC)

The B.C. ministries of Finance and Energy have estimated the project would generate $22 billion in direct government revenue over the next 40 years.

The project is also expected to employ as many as 10,000 people in its construction and up to 950 in full-time jobs.

The Kitimat plant will be within the traditional territory of the Haisla Nation. Trudeau thanked that nation, as well as others in B.C., for their “leadership” in getting the project approved.

Final approval has been given for a $40-billion liquefied natural gas plant and pipeline for Northern B.C. The 670-kilometre pipeline will run natural gas from Dawson Creek to the plant in Kitimat, which will liquefy and export the gas to Asia. (CBC News)

Crystal Smith, chief councillor of the Haisla Nation, was emotional at Tuesday morning’s announcement.

“On behalf of our entire nation, we extend our gratitude … for the investment being made in Haisla territory,” she said.

“Haisla … history is unfolding before our eyes. We are having a share and we are having our say.”

Then-premier Christy Clark listens as Calitz responds to a media question in Ottawa Feb. 4, 2016. Investors have given final approval for the LNG project. (Adrian Wyld/Canadian Press)

Environmental factors

To help make the project happen, Horgan’s government offered a break on the carbon tax as well as an exemption on provincial sales tax related to construction costs.

According to information provided by the province, LNG Canada would be the least greenhouse gas-intensive large LNG facility in the world.

B.C. Green Party Leader Andrew Weaver was skeptical the project would mesh with the province’s climate plan.

Under the NDP and Greens’ Confidence and Supply Agreement (CASA), the parties committed to reducing greenhouse gases by 40 per cent by 2030 and 80 per cent by 2050.

In a statement, Weaver called the LNG announcement a “profound disappointment,” saying his party would not support the LNG legislation that would be required.

Horgan’s minority NDP government is supported in the legislature by the B.C. Green Party​.

History of LNG in B.C.

On Tuesday, Horgan acknowledged that the first discussions on LNG in B.C. began with a pitch for a plant in Prince Rupert in 1982.

He also acknowledged the previous B.C. Liberal government, specifically former minister Rich Coleman, for “tirelessly” lobbying for the project from 2011 onward.

In a Facebook post, Christy Clark, premier from 2011 to 2017 who helped lead the charge for the project, said Tuesday was “the single best day of my professional life.”

“This is an achievement for our whole country,” she wrote.

Since her election defeat in 2017, Clark has retired from politics and joined the law firm Bennett Jones as a senior adviser in Vancouver. She has also since been appointed to the board of directors for Shaw Communications.

With files from The Canadian Press

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