Is this a postive for your Mooncor?The Duvernay could become Alberta’s largest oil play ever outside the oilsands
https://www.oilpatchreport.com/...ption=com_content&view=article&id=64%3Athe-duvernay-could-become-albertas-largest-oil-play-ever-outside-the-oilsands&catid=49%3Abackgrounder[23/05/2011 5:21:57 PM]
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BACKGROUNDER
The Duvernay could become Alberta’s largest oil
play ever outside the oilsands
16 May 2011 | Mike Byfield
Like a supertanker emerging from thick fog, the dim outlines of what could become Canada’s
largest hydrocarbon liquids play ever outside the oilsands are just starting to take shape. A
handful of producers are tackling the Duvernay formation, which stretches across western Alberta
from just north of Calgary to the Northwest Territories. The massive formation is routinely seen
by geologists as the most prolific source rock for oilsands bitumen as well as crude-rich Devonian
reefs like the Leduc, Keg River, Swan Hills and more. Until now, however, the tight shales of the
Duvernay itself could not be tapped economically.
The Duvernay deposits, like the Bakken shales of Saskatchewan, Montana and the Dakotas, were
laid down at the beginning of a new marine cycle. The Duvernay represents the transgressive
sequence of the Devonian period, as the Bakken and Exshaw do for the later Mississippian
period. During these sequences, oceans were expanding, creating the calm waters that permit
the settling of fine particles on the seabed. Too deep to be affected by wave action and hence
oxygen-free, conditions were also conducive to the generation of hydrocarbons in huge volumes.
In B.C., the distal equivalent formation to the Duvernay is the Muskwa, whose tight gas resource
has fuelled the Horn River Basin play. The Muskwa/Duvernay formation rises closer to the surface
as it moves eastward. Horn River Basin reserves are dry gas, but the Alberta equivalent (less
thermally mature due to lower heat and pressure) is more liquids-rich. “Because maturity
decreases from west to east, it is probable that oil, instead of gas, will be encountered at these
shallower depths,” says a paper by GTI E&P Services Canada, published by the Gas Research
Institute in 2004. With gas prices wallowing but prices high for crude oil and gas liquids, the
Alberta prospects have become economically enticing – if the resource can be produced at a low
enough cost.
The Rainbow field in Alberta’s far north
produces light oil prolifically from Devonian
Keg River reefs. In 2008 this area attracted
EOG Resources, Inc., which has earned a
formidable reputation for jumping early and
effectively into resource plays like the
Bakken, Horn River Basin and Eagle Ford.
EOG’s reserves total two billion BOE (barrels
of oil equivalent). Purchasing Crown land
through an agent, EOG’s wholly-owned
Canadian subsidiary drilled a vertical well just
east of the town of Rainbow Lake in early
2008. The well (CCRL Rainbow 11-30-109-8)
went to the bottom of the Slave Point
formation, below both the Keg River and
Muskwa/Duvernay.
That well was cored but not produced. EOG
then drilled a nearby horizontal well(CCRL HZ
Rainbow 2-30-109-8). The company again
veiled its identity for a period by having an
agent named as operator. The well, spudded
in September 2009 and rig-released 18 days
later, was fracture stimulated in 11 stages.
Vertical depth is1,611 meters, total borehole
depth 9,875 m. Production from the
Muskwa/Duvernay zone was initiated on 1
November 2009, suspended for a period, then
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The Duvernay could become Alberta’s largest oil play ever outside the oilsands
https://www.oilpatchreport.com/...ption=com_content&view=article&id=64%3Athe-duvernay-could-become-albertas-largest-oil-play-ever-outside-the-oilsands&catid=49%3Abackgrounder[23/05/2011 5:21:57 PM]
resumed. Daily oil output averaged 103
barrels and 70 million cubic feet (MMcf) per day for the first quarter of this year.
Operating under its own name, EOG Canada Resources Inc. spudded a second horizontal well
nearby last August (EOG HZ Rainbow 7-28-107-9). Vertical and borehole depths were similar to
the first horizontal well. Details remain confidential while the well remains on its one-year tight
hole status, but it is reportedly standing. To date, EOG has maintained a low profile about its
Muskwa/Duvernay initiative at Rainbow. Recent land sales in the area have been brisk at
moderate prices.
A joint venture by three independent producers at Kaybob – northwest of Edmonton near Fox
Creek, a mid-way point in the Alberta Duvernay – has drawn widespread interest. The partners
are Trilogy Energy Corp. (average daily production of 22,788 BOE in 2010), Celtic Exploration
Ltd. (17,304 BOE in 2010) and Yoho Resources Inc. (2,269 BOE in 2010). Each partner has a
one-third working interest in 30 gross sections of land.
The partners’ first Duvernay horizontal well (15-33-060-20w5), operated by Celtic, flowed at a
rate of 2.1 MMcf/d of gas with 56° gravity condensate from a 1,787-meter lateral at 3,300 m
vertical depth. Yoho said the well was expected to yield 75 barrels per MMcf of gas including the
free condensate. Mechanical problems prevented seven of the 13 planned frack stages at the
well.
In mid-April, Trilogy announced the results from the trio’s second Duvernay well drilled over a
50-day period from 16-14-60-20W5 to a bottom hole location at 03-13-060-20W5. Depth totaled
4,866 meters, with a horizontal lateral of 1,391 metres within the Duvernay. The well was
flowing up 7 inch casing at approximately 1,250 BOE per day (5.2 MMcf per day of sweet natural
gas and an estimated 390 barrels per day of natural gas liquids). Twelve frack stages were
performed.
This was one expensive well, with a drilling cost of $6.5 million plus completion costs of about
$11 million. Calgary brokerage Peters & Co. estimated that a reasonable return would require an
all-in well cost of about $12 million. However, Trilogy said gas liquids production was expected to
rise once 138,600 barrels of slick water used during the fracturing operation had been fully
recovered. And bookkeeping can be a flexible discipline - it’s possible that the reported cost was
pegged high to discourage competitors. Trilogy said it plans to drill another Duvernay horizontal
at Kaybob later this year.
At Alberta’s March 23 land sale, two parcels of 8,225 hectares and 11,802 hectares (handled
through land agents) drew bonuses of $37.9 million and $96.7 million respectively for deep
rights. Their locations – 5-23-061 and 5-24-060 – would be consistent with Duvernay projects in
central Alberta, although uncertainty about the potential drilling targets will remain until the real
identity of the producers involved becomes known.
In February, Chevron Corp. revealed its recent acquisition of about 80,000 hectares of Alberta
Duvernay acreage, which it described as “an important core land position.” The multinational is
planning to commence appraisal drilling during the second half of this year. Nor is Chevron
alone. Crown land sales have picked up across the Duvernay formation in recent months. “True
exploration is at a very low ebb in Alberta right now. Almost everyone is focused on resource
plays, which require large land positions. Clearly, producers are buying up the Duvernay while
prices remain affordable,” says one landman, who requested that his name be kept private.
A $4.9 million bid through a land agent at the Crown auction on April 6 raised eyebrows,
according to this source. The location of the 1,898 hectare parcel (4-23-031) sits northeast of
Calgary at the southern tip of the Duvernay. Reportedly, a vertical well drilled in that district
during the 1950s had a massively thick oil show on a drillstem test. In fact, well control is
typically good across the sprawling Duvernay, thanks to drilling for other targets over many
decades. Another encouraging factor is the thickness of the ancient seabed, which varies from 20
meters to a whopping 100 meters.
On May 6, the National Energy Board and British Columbia Ministry of Energy and Mines released
the first probability-based resource assessment of a Canadian shale basin. The joint report
estimates the shale-gas resource of the Horn River Basin at 78 trillion cu. ft. of potential
marketable gas. That’s more than double the figure from a previous assessment. The Alberta
Duvernay, although less thoroughly examined to date, is a far larger formation.
Can this tight shale reservoir be exploited economically on a scale consistent with its massive
size? No one knows at this point, but the attempt to do so is underway. Over the past decade,
the ongoing development of sophisticated completion tools has cracked tight formations across
the continent. If the Duvernay did indeed generate the oil that now resides in the oilsands –
estimated at 1.7 trillion to 2.5 trillion barrels in place – the source rock itself may prove to be a
motherlode indeed.
Oilpatch