Producers in Alberta's liquids-rich shale play at Duvernay are likely to invest some C$1 billion ($955 million) in drilling activities over the remaining six months of 2013, with that figure likely to rise further next year, oil and gas consultancy Peters and Company said in a report Thursday.
The current pace of activity indicates about 100 wells will be drilled by the end of this year, with some 46 wells already spudded, the report said, adding that as many as 200 wells could be drilled next year.
"Should the Duvernay [play] grow at a pace similar to the Montney reservoir, we believe the play has the potential to generate 500 to 600 wells per year, representing an annual demand of over 60 rigs," it said.
To accommodate this level of demand, contract drillers would be required to build, relocate and retrofit as many as 50 new drilling rigs this year, representing an investment by producers of over C$1 billion, it added.
With current gas-in-place resources estimated of over 700 Tcf, the Montney play -- in neighboring British Columbia -- is set to provide feedstock gas for several grassroot LNG projects planned in British Columbia by Malaysia's state-owned Petronas, Shell and Chevron Canada.
Describing Alberta's Duvernay in west-central Canada as a high-pressure resource play located at depths of 2,200 meters to 3,400 meters, Bob McManus, a spokesman with Alberta's Energy Department, said Thursday that interest in the Duvernay Basin was first visible in 2011 when producers "aggressively" bought drilling rights in that area.
"[The auction at] Duvernay was a prime driver in our earnings reaching C$3.2 billion for fiscal 2011-12 [April-March]," said McManus.
Four new shale oil and gas plays have emerged in Alberta and they are located at Cardium, Viking, Slave Point and East Basin Duvernay, Dean Rokosh, a section leader for energy resource appraisal with the Alberta Energy Regulator, told Platts Thursday.
"Resource evaluation will start this year and it is still early days," Rokosh said. "But on a P50 [probable 50] basis, the new plays could potentially contain 58.6 billion barrels of NGL and 423.6 billion barrels of tight oil."
Calgary-based Yoho Resources -- one of early explorers at Duvernay -- said last month that initial drilling results have convinced the company to continue drilling, despite high drilling costs of nearly C$10-11 million for each well.
"Although our current production of 2,500 boe/d is 65% gas, our netbacks are coming more in line with most crude producers due to the high liquids content from the Duvernay output," company CEO Brian McLachlan said at a Calgary industry conference in late June.
"As we add more Duvernay production going forward, Yoho's netbacks will continue to rise," he said then, without elaborating.
Yoho holds 5,600 net acres of land at Alberta's Duvernay play. At the end of March this year, netbacks from the company's Duvernay production stood at C$42.37/barrel of oil equivalent, McLachlan said.
By the end of this year, the company plans to drill three or four wells at Duvernay, with a capital program of C$37 million, he said last month.
Meanwhile, Husky Energy said in early May that it will continually expand its acreage at the emerging Duvernay play, affirming estimates it may have 200 million barrels of resources.
"Those numbers do not sound absurd to us, as Husky probes about 25,000 acres" in a dense portion of the Duvernay play, company CEO Asim Ghosh said on a conference call.
Husky's Chief Operating Officer Rob Peabody said on the same call that although the company does not release individual well results, "everything we have drilled has had very high liquids yields and we have been able to bring costs way down on the Duvernay."
The application of hydraulic drilling and multi-stage fracking have not only allowed producers access to more barrels of hydrocarbons, but also reduced upstream development costs by 10%-15%, Ron Gusek, vice-president for corporate engineering at Calgary-based oil field services company Sanjel said Thursday.
"We are receiving several inquiries regarding Duvernay and no producer has, as yet, reached a point of commercial development," Gusek said. "But with gas prices getting stronger work is progressing cautiously towards well optimisation."
According to the Peters and Company report, the Duvernay play -- which is spread over more than 1 million acres -- is in the early stages of delineation and could potentially present opportunities to drill 7,000 wells.
