By Heather Douglas
“Golf is deceptively simple and endlessly complicated. It satisfies the soul and frustrates the intellect. It is at the same time rewarding and maddening – and it is without a doubt the greatest game mankind has ever invented.” Arnold Palmer (1929 — 2016). The golfing legend, known as “The King,” won 92 tournaments in his career, including seven major championships.
In the great game of geological golf, there are several world-class fairways which are deviously easy and continually complex. The extensive liquids-rich Montney fairway in western Alberta and northwestern British Columbia has positioned itself as a worthy rival to the largest shale zones in the United States, namely the Marcellus and underlying Utica formations in the Appalachian Basin (located in the states of New York, Pennsylvania, West Virginia, and Ohio).
There are no signs these plays have peaked, let alone started to decline.
Geological Fairways
According to the National Energy Board (NEB), the Montney contains nearly 449 trillion cubic feet (Tcf) of marketable natural gas, almost half of this country’s known reserves, coupled with near 15 billion barrels of marketable natural gas liquids. Output has doubled since 2012, now producing about 3.5 billion cubic feet (Bcf) per day and now contributes approximately one-third of Western Canada’s natural gas production.
A typical B.C. well costs about $4.8 million to drill and $10 to $12 million in Alberta or $2.50 per million cubic feet (mmcf) of production. The net pay ranges from 100 to 300 metres of thickness. From 2017-2020, producers are expected to spend $34 billion drilling and completing wells, estimates FirstEnergy Capital.
The U.S. Geological Society (USGS) reports the Marcellus and Utica gas plays have provided between 85 and 90 per cent of that country’s shale production since 2012. An operator drilling a Marcellus well needs to budget $10 million (U.S.) and $13.7 to $15 million to reach the Utica. This translates into a break-even price of $3/million British thermal units (Btu) or less. The net pay ranges from 12 to 270 metres in the Marcellus and 20 to 300 metres in the Utica.
Ohio Gas and Oil reported (February, 2016) the “Utica shale play is the most profitable and most efficient shale play in the U.S. The rock is very high pressure, which means natural gas is easier and less expensive to produce.”
Although no one has yet claimed either the Montney nor Marcellus and Utica shale zones gratify the soul, experts do acknowledge they vex the intellect.
Engineering Innovations
Technology has played a huge role in cracking the engineering challenges posed by shale production. Recent advances – horizontal drilling, multi-pad wells, rig mobility, hydraulic fracturing, micro-seismic monitoring, and produced water technologies – were all fueled by an increased demand for baseload gas-fired power generation, industrial use of clean-burning fuels, and the growing international market for liquefied natural gas (LNG). All three are expected to exert upward pressure on prices.
In Canada, the feedstock for the 20 LNG projects proposed for the west coast totals at an eye-popping 41.9 Bcf/d, most of the production coming from the Montney. These range from CNOOC’s Aurora project at Digby Island, Chevron and Woodside Energy’s Kitimat LNG facilities, a joint venture of Shell, PetroChina, KOGAS, and Mitsubishi to build Kitimat LNG Energy, Spectra/Enbridge’s Kitsault Energy terminal, Pacific Northwest LNG owned by Petronas, JAPEX, Petroleum Brunei, and Sinopec, to Tuck Inlet owned by ExxonMobil and Imperial Oil.
Meanwhile, production from the Marcellus has flooded the U.S. Midwest through several pipelines including: Texas Eastern Transmission’s Rockies Express reversed line from Ohio westward, Columbia Gas’s East Side expansion takes gas from Pennsylvania to mid-Atlantic markets, Tennessee Gas’s Broad Run from West Virginia to the Gulf Coast states, Tetco’s Uniontown-to-Gas City project from New York to Indiana, and Algonquin’s Constitution line moves gas from New York to the northeast and New England.
The Montney, Marcellus and Utica fairways are at the same time rewarding and maddening.
This natural gas revolution is being closely watched, on both side of the border by friends and foes – ranging from politicians, government bureaucrats, regulators to investors, Indigenous Peoples, environmentalists, and anti-fracking activists. Some believe natural gas will help both countries meet their respective climate change goals, others are opposed to natural gas playing any role in the “post-fossil fuels” era.
The anti-fracking crowd have taken their cases to court. In Canada, the Supreme Court ruled against Jessica Ernst and her appeal concerning groundwater contamination caused by fracking. The case made legal history. “This was the first time the Supreme Court has heard a case about human rights with an environmental context,” stated Lynda Collins, a professor of law at the University of Ottawa’s Centre for Environmental Law and Global Studies.
Fracking and groundwater contamination are also front and centre in the Appalachian Basin. Both sides are waiting for a ruling by the Second Circuit Court of Appeals in Philadelphia, while the U.S. Chamber of Commerce released a report about the negative economic impact a fracking moratorium would have on Ohio and across the nation.
It’s ironic. Some of the shale gas from the Marcellus and Utica fairway is now being sold in Eastern Canada, backing out natural gas from the Montney and other Western Canadian basins.
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