Liquids yield driving Montney production growth forecast

May 17, 2019
Total production in Canada’s Montney play will likely reach 10 bcfd of natural gas equivalent this year, an increase of 16% from 2018, and is forecasted to reach 20 bcfed by 2030, driven by rising liquids yield across various sub-plays, according to Wood Mackenzie research.

Total production in Canada’s Montney play will likely reach 10 bcfd of natural gas equivalent this year, an increase of 16% from 2018, and is forecasted to reach 20 bcfed by 2030, driven by rising liquids yield across various sub-plays, according to Wood Mackenzie research.

Liquids production is expected to increase 26% in 2019, while gas production may increase by 14%.

Despite falling gas prices, improving sub-play economics driven by higher liquids yields have strengthened the Montney’s position and much of the play is economic at $2 (Can.)/Mcf.

“Depressed natural gas prices have caused operators to rethink Montney development,” said WoodMac senior analyst Nathan Nemeth.

“Montney specialists have made major headway on improving completion design and are being rewarded with operational performance. Liquids is driving the story,” he said.

Drilling activity during 2010-14 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. The remaining value of the play is estimated to be more than $65 billion (Can.), but Nemeth noted 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 said the corporate dynamics also keep the Montney interesting, with most activity from a mix of public and private local 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,” he said.