Canadian Montney play production to increase by 16% in 2019

Total production in Canada's Montney play will likely reach 10bn cfe/d in 2019, an increase of 16% from 2018, according to new research from Wood Mackenzie. The outlook for Montney production stays positive beyond this year, with the play forecast to reach 20bn cfe/d by 2030.

Much
of the forecast growth is being driven by the rising liquids yield across various sub-plays within the Montney. Liquids production is expected to increase by 26% in 2019, while gas production may increase by 14%.

Despite falling natural gas prices, improving sub-play economics driven by higher liquids yields have strengthened the Montney's position in the greater North American landscape. Much of the play is economic at C$2/mn cf AECO (Alberta Energy Company) natural gas prices.

Nathan Nemeth, Senior Analyst at Wood Mackenzie, says: ‘Depressed natural gas prices have caused operators to rethink Montney development. Montney specialists have made major headway on improving completion design and are being rewarded with operational performance. Liquids is driving the story.’

Drilling activity from 2010-2014 was led by operators with LNG export aspirations. From 2015, activity has been led by operators targeting natural gas liquids, specifically condensate.

Not all areas of the Montney are liquids rich, however. Wood Mackenzie's research divides the formation into 15 sub-plays, based on multiple factors including geology, geography, gas-to-oil ratios, productivity, and costs.

The remaining value of the play is estimated to be over C$65bn, but Nemeth notes that the value is concentrated in the best areas, with the top five sub-plays accounting for 74%.

At this stage, two sub-plays account for about 50% of the Montney's liquids production - Heritage, in British Columbia, and Kakwa, in Alberta.

Nemeth says: ‘Besides the drive for liquids, the corporate dynamics keep the Montney interesting. Much of the activity is from local players, with a mix of public and private companies. But you also have international players like ConocoPhillips and Murphy, as well as LNG-driven activity from Shell, Petronas, Mitsubishi and PetroChina. The growing liquids production from the Montney, combined with the final investment decision for LNG Canada last year, make the Montney an important play to keep an eye on in the future.’

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