After a hiatus of more than two years, Petronas Energy Canada Ltd. is back in the field in northeast British Columbia, as it begins drilling to underpin its share of natural gas for the LNG Canada export project, a senior executive said last week.
However, the former Progress Energy Canada Ltd. has no plans to return to the frenetic pace of 2013-2014 when it was running nearly 30 rigs continuously in the area, Dennis Lawrence, vice-president of production, told a B.C. Montney technical session organized by the Canadian Society for Unconventional Resources (CSUR). “Every single person in Northeast B.C. was running flat out.”
This time around, the pace will be more measured with the company looking at 40 years of steady rational development in northeast B.C., he said. “That’s better for our business. It allows us to optimize, it allows us to plan properly and it is better, quite frankly for the communities in which we operate.”
Petronas Canada started with one rig in October of this year and will add a second one at some point in 2019, said Lawrence. It envisions gradually building up to four to six rigs and a couple of hydraulic fracturing spreads for the next 30 plus years as it develops its 60 tcf of recoverable resources.
The company is currently drilling the fourth well on its first “start-up” pad and the second well is already faster than any of its other 600 Montney wells. Current net production is just under 70,000 boe/d and Petronas expects that to double to 140,000 boe/d over the next five years in a measured steady ramp up to an LNG Canada onstream date in 2023/2024.
However, not all Petronas gas from northeast B.C. will go to the LNG Canada facility, said Lawrence. “We will be moving a lot of gas out of northeast B.C. and we have got some of those avenues opened up to us now and we made some commitments but we are not done yet.”
Formed in the early 2000s, Progress Energy spent the following few years acquiring land in northeast B.C. north and west of Fort St. John and building a land position. In the 2011-2012 period, it shifted to proving the resource and Petronas became involved, first as a joint-venture partner and then as the owner of the company.
Between 2012 and 2015, Petronas was very much focused on delineating the resource with an LNG project clearly in mind as it drilled a grid of wells across the land base. “We were really figuring out what we had and assessing the quality of the resource across the entire suite of our lands,” said Lawrence.
The company drilled three-mile grid drilling pads with each pad typically having three wells — an Upper, Middle and Lower Montney. The wells were drilled with similar lateral lengths, well designs and completion techniques. “That was done very deliberately because we wanted to keep as many things as we could the same so you would get a true picture of the quality of the resource across our lands.”
However, what that meant was that while Petronas started with a state-of-the art well design in 2013 and 2014, due to rapid changes in the industry its new wells will be very different from those delineation wells, he said. The current well design is a 2,600 metre lateral with about two tonnes per metre of proppant. Although the company feels that is the “sweet spot,” it will continue experimenting with that, the session heard.
Petronas also has begun construction of two gas plants in the heart of its Montney lands and significant pipeline infrastructure needed to connect those plants with some of its existing compressor stations.
In the wake of lower natural gas and LNG prices, the company paused between 2016 and 2018 to reset its strategy, figuring out how it could monetize its resources. Petronas had been working on its own LNG plant at Prince Rupert but opted not to proceed, deciding instead to participate as a partner in the Royal Dutch Shell plc-led LNG Canada plant at Kitimat.
“We have pivoted … we are already taking the first steps in that strategy and the LNG Canada investment over the last year or so is a huge first step in that strategy,” said Lawrence.
From 2019 forward, “it’s about executing that strategy and in essence finding ways to monetize that 60 plus tcf resource that we have on our lands.” He also noted that the cost of feedstock is a big part of the overcall cost of LNG and “we only see it going down over time.”
Petronas commitment
According to Lawrence, Petronas is “very, very committed” to Canada with its North Montney position the second largest position in its worldwide portfolio. The company wants to grow its unconventional portfolio and its Canadian assets represent the largest unconventional element in its portfolio, he noted.
Recognizing the need for continued innovation, the Canadians persuaded their parent company to establish an “unconventional centre of excellence” in Calgary. The centre consists of a group of technical experts tasked with finding the next big improvement in well design reservoir understanding technology. Established about a year ago, it is now fully up and running.
“They are looking at everything from rock mechanics, to frac design to flowback to all of the artificial intelligence and learning systems that can go into all of that, all really focused on the supply cost side of the equation,” said Lawrence.
Petronas also believes it can reduce operating costs, the CSUR session heard. The company has a program, the integrated operating model. The group on the production and operations side is focused on making step changes in operating efficiencies, leveraging technology data, artificial intelligence, turning them into a lower operating cost per unit.
“We are well down the path on remote operations, centralized control rooms, piloting some of that stuff and we are certainly looking forward to scaling that up across our entire operation,” he said. “It is clearly the wave of the future and we intend to be part of that.”
Petronas has nearly 1.5 million gross acres in northeast B.C., of which about 900,000 gross acres are Montney rights. It also has about 800 active wells of which just over 600 (about three-quarters) are Montney producers. In addition, the company has four gas plants, 33 compressor stations to feed the plants and about 3,200 kilometres of operated pipeline.
