The Duvernay formation, which cuts across much of northwestern and central Alberta, has been touted as the next major North American liquids-rich shale play.
Alberta's Duvernay formation is often touted as the next major North American liquids-rich shale play, but results have been slow to bear that out despite billions of dollars spent so far on land and drilling.
The Duvernay, which cuts across much of northwestern and central Alberta, has been a top focus for several large and small energy companies, which kicked off a land rush around 2009. One big draw is the potential for large volumes of condensate production, which is needed as a blending agent for bitumen from the oil sands.
It has also been a hot region for deals – both acquisitions and joint ventures. Companies such as Talisman Energy Inc. and Athabasca Oil Corp. are currently seeking partners to defray the high costs of development in the tricky operating area.
Five years in, however, it is still too early to trumpet widespread success, according to a report by FirstEnergy Capital Corp.
"Recognizing that it is still early days, and while remaining encouraged and optimistic surrounding the size, scope, and economic potential of the play, a clear declaration of economic viability across the entire trend appears elusive," FirstEnergy analyst Robert Fitzmartyn wrote in the report. He stressed that research and development was still going on.
Mr. Fitzmartyn pegs overall reserves in the north, central and south portions of the play at 392 trillion cubic feet of natural gas, 43.3 billion barrels of condensate and gas liquids and 35.8 billion barrels of oil in place.
Oil and gas liquids production averages 7,460 barrels a day and natural gas output is at 58.4 million cubic feet a day, according to the FirstEnergy report. Mr Fitzmartyn said production is restricted by limited equipment to process the liquids and pipe them out of the region, though expansions are under way. There are 67 wells that are pumping commercially out of 280 that have been licensed.
Companies have poured $2.8-billion into land acquisitions to date, according to the report.
Still, development has lagged other major shale plays, notably the Eagle Ford in Texas, one of the most actively drilled formations in the United States, with oil production climbing to nearly one million barrels a day and natural gas output to nearly four billion cubic feet a day last year, according to the U.S. Energy Information Administration. The first wells there were drilled around 2008.
Closer to home, natural gas output in the Montney shale play in British Columbia has jumped more than sevenfold in the past five years to around 4.5 billion cubic feet a day.
Mr. Fitzmartyn said he expects better indications whether the play will live up to its billing soon, especially in its northern reaches, as more capital is spent to solve its geological and engineering riddles. In addition, he said the potential for liquids production shows why major oil companies remain interested.
Such development is not for the faint of heart or light of wallet. Horizontal wells with multistage hydraulic fracturing can run between $10-million and $15-million each. Some of the large Duvernay players include Exxon Mobil Corp., Encana Corp., Royal Dutch Shell PLC and Chevron Corp. Smaller leaseholders are Trilogy Energy Corp., Vermilion Energy Inc. and Yoho Resources Inc.
Jeffrey Jones