The Montney Formation in Eastern British Columbia and Western Alberta: Geology, Well Production, Opportunities, and Challenges

     For about a decade, the Montney Formation play in Western Canada has been recognized as one of the best shale plays in North America and one of the largest global gas accumulations. In 2013 Canadian oil & gas evaluators determined that the formation could ultimately produce 449 trillion cubic feet of marketable natural gas, 14,521 million barrels of marketable natural gas liquids (NGLs), and 1,125 million barrels of oil. The Montney Formation is a Lower Triassic shale, siltstone, and dolomitic siltstone sequence in the Western Canadian Sedimentary Basin in British Columbia and Alberta. Shale gas extraction in the distal facies of the western part of the basin began in the late 2000s.

     A November 2018 report by Cordax shows the development and future potential of the Montney. Below is an activity map from that time period showing drilling along much of the play’s extent. Several different zones have been targeted in the formation. Some attributes that favor the Montney as a very good unconventional reservoir include high pressure, significant NGL content, large per-well reserves and recoveries, slow production declines, amenability to production enhancement through hydraulic fracturing, intermediate drilling depths, and sweet gas.

 

     Although the Montney has often been called a shale, it does not contain much actual shale and would be better termed a low permeability or “tight rock” play. There are organic-rich mudrocks in the formation that act as hydrocarbon source rocks. The formation changes facies from larger grain-sized sandstones and siltstone shoreface deposits on the eastern end of the basin to deeper water facies including finer-grained siltstone, shale, and some distal turbidites to the west, as shown below. The Doig formation just above the Montney is also produced in some areas. A cross-section, also shown below, shows the thickness of the formation across the basin. The other figures show basin stratigraphy.

 

     A March 2016 article by the Canadian Society of Exploration Geophysicists sought to quantify Montney reserves and identify “sweet spots” for liquids, NGL, and dry gas production. Some graphs from that analysis are shown below.

 

     According to the Canadian Energy Regulator (CER), the Montney Formation contains about half of Canada’s natural gas reserves. That makes it Canada’s premier natural gas play. As of September 2022, it was producing half of Western Canada’s natural gas. The Montney is expected to continue to supply Western Canada’s LNG exports as more export terminals are built. According to researchers at the University of Calgary and the University of Toronto in 2021:

 

 “They found the emissions intensity of the LNG Canada terminal to be lower than U.S. competitors. It’s a result of Canada’s colder climate, shorter shipping distances to Asia, the use of hydroelectric power, and success in methane emissions reduction.” 

 

     The Montney is said to rival the Marcellus Shale in the U.S. in reserves. It is less developed than the Marcelus thus far and is expected to drive Canada’s hydrocarbon production, particularly natural gas. According to the Canadian Energy Centre:

 

“Analysts predict that by 2030, roughly two thirds of all natural gas wells in western Canada will target the Montney play, producing about 18 billion cubic feet per day by the end of this decade.”

 

     The Montney is thought to have had a complex geological history that includes the significant migration of gas condensate. A 2022 paper In Nature Scientific Reports utilized stable carbon isotope and PVT compositional data from produced samples representative of in-situ petroleum fluids to determine that gas condensate migrated. Multiple episodes of internal hydrocarbon migration were identified. Some figures from the paper are shown below.

 

     A 2021 AAPG paper explains the specifics of the Montney play as an unconventional hybrid petroleum system and how gas compositional mapping reveals that geologic structures controlled hydrocarbon migration routes:

 

“The Montney Formation provides a well-documented example of such a play, in which petroleum distribution is controlled by a combination of downdip increase of thermal maturity, fluid migration influenced by lateral and vertical permeability variations, and pressure compartmentalization.”

 

“We demonstrate that produced gas compositional mapping is a powerful tool that complements comparatively sparse data from core- or cuttings-based organic geochemistry and petrography methods to provide an unparalleled level of detail of petroleum distribution at various scales. Coupling this compositional mapping with reservoir pressure data and published faults reveals a strong control of the structural framework on petroleum migration routes. The main targets of horizontal drilling in the Montney play are carrier beds that were charged by updip migrating petroleum and experienced further thermal maturation during the burial history. The relative contribution of different source rocks to this petroleum system remains speculative, and further investigation is needed to solve this conundrum.”

 

     A 2021 paper in Marine and Petroleum Geology explored the occurrence and timing of mineralized fractures and how they relate to the development of the Montney-Doig petroleum system.

 

“…host-rock facies (particularly grain size) and vertical facies changes appear to be the leading factors controlling fracture occurrence. A less relevant role was played by the occurrence of diagenetic carbonates, while TOC possibly did not control fracture occurrence.”

 

“Three generations of calcite cemented fractures were identified. Vertical fractures (first generation) post-dated the onset of oil generation (Late Cretaceous). Horizontal, bedding-parallel fractures (second generation) post-dated the onset of gas generation and possibly opened close to maximum burial, corresponding to peak hydrocarbon (CH4) generation (Late Cretaceous - Early Paleogene). Vertical fractures (third generation) post-dated the horizontal ones and opened during basin uplift (Middle to Late Paleogene).”

 

Recent Drilling Forecast

 

     Some important U.S. players in the Montney include Ovintiv, Murphy, and ConocoPhillips. The graphic below from 2021 shows the operators ranked by well count and drilling stats up to that time.

 

     Calgary-based Precision Drilling made some interesting observations about drilling contracting in a recent article for Natural Gas Intelligence. Precision’s CEO Keven Neveu noted:

 

“Exploration and production (E&P) customers are discussing plans to activate natural gas-directed rigs in the Montney by mid-2025’”

     LNG Canada, a joint venture between Shell plc, Petronas, PetroChina Co. Ltd., Mitsubishi Corp. and Korea Gas Corp. Phase 1 of the British Columbia facility is expected to place around 12.7 million metric tons/year of LNG with first cargoes expected in mid-2025. Montney drilling has been soaring for the past three years in the NGL windows with the pentane supplied as a diluent for Canada’s heavy oil play in Northeast Alberta. Operators have built up an inventory of natural gas. Once that gas begins to be sold as LNG the need to keep that inventory up will grow so rigs are expected to be added. Rig counts have been down for the past year or so. Eventually, the supply-demand cycle will bring them back up a bit eventually. 

     The Precision CEO also noted:

 

 “We see, certainly for development drilling in Montney, more of a trend for long-term contracts. So they're more willing to sign the contracts than might have been a few years ago.”

Precision is “not anxious to tie up the entire fleet with long-term contracts, but a blend of half the rigs contracted, half the rigs exposed, maybe a little more contracted. It's kind of how we look at things.”

 

     In a similar manner as LNG exports pick up along the Gulf Coast in mid to late 2025, drilling is expected to pick up in the nearby Haynesville in the Louisiana Salt Basin for export.

 

The “drilling contractor mix” is likely to “shrink to fewer and larger, more capable drillers rather than the fractured vendor base used by many of those acquisition targets,” Neveu said. “Some of this contractor rationalization is already underway, and we are encouraged by the sophisticated customer interest in automation, safety performance and overall rig performance.”

 

Challenges Include the Potential for Induced Seismicity

     I attended a talk at the Ohio Geological Society a few years ago about developing “traffic light” systems for the management of induced seismicity events. In these traffic light systems, seismometer networks are deployed to catch induced seismicity events that are likely caused by either wastewater injection or by pressure pumping during hydraulic fracturing operations which can cause underlying faults to slip. These systems pinpoint the source of the seismicity and the individual fault that slips. They are referred to as traffic light systems since they can lead quickly to a temporary or permanent stop of pumping operations depending on the perceived risk. The talk I attended referenced a Western Canadian fault slip seismicity event in the Montney play. Another 2022 paper in Nature Scientific Reports concluded as would be expected that fault slip is a function of injection pressure during hydraulic fracturing in the Montney. The British Columbia area of the play contains a higher number of faults and more induced seismicity events, although seismicity events are also fairly common in the Alberta part of the play. The figures below from the paper show pore pressures, principal stresses, and seismicity events, respectively.

 

 

References:

 

This Emerging Shale Play Is Ripe For The Picking. James Burgess, OilPrice.com. January 28, 2015. Little-Known Small Cap Set To Dominate Montney Shale Play | OilPrice.com

The Montney – A Closer Look. Cordax. November 21. 2018. The Montney – A Closer Look — Cordax Evaluation Technologies Inc.

With Montney Production Set to Grow, US E&Ps Seize Opportunities. Hart Energy. October 1, 2024. With Montney Production Set to Grow, US E&Ps Seize Opportunities | Hart Energy

Look to 2025 for Natural Gas Drilling Gains in Montney and Haynesville, Says Precision CEO. Carolyn Davis. Natural Gas Intelligence. August 7, 2024. Look to 2025 for Natural Gas Drilling Gains in Montney and Haynesville, Says Precision CEO (naturalgasintel.com)

Montney formation. Wikipedia. Montney Formation - Wikipedia

Montney/Doig Resources Play. Birchcliff Energy. 2024. Montney/Doig Resource Play | Birchcliff Energy

Finding Sweet-Spots and Quantifying Recovery Potential in Unconventional Plays: Using the Montney Play as an example of how a Common Risk Segment Mapping approach can be applied to quantifying Estimated Ultimate Recovery in pervasive hydrocarbon systems. Ian J. Cockerill and Aaron W. Hughes. CSEG Recorder. Mar 2016 | VOL. 41 No. 03 |. Canadian Society of Exploration Geophysicists. Finding Sweet-Spots and Quantifying Recovery Potential in Unconventional Plays | CSEG RECORDER

‘Inexhaustible energy’: Top tier Montney play driving the future of Canadian LNG: Montney production to grow significantly through 2050, even under more aggressive climate policies. Deborah Jaremko. Canadian Energy Centre. April 3, 2023. ‘Inexhaustible energy’: Top tier Montney play driving the future of Canadian LNG (canadianenergycentre.ca)

Injection-induced fault slip assessment in Montney Formation in Western Canada. A. Yaghoubi, M. B. Dusseault & Y. Leonenko. Nature Scientific Reports. 12, Article number: 11551 (July 2022). Injection-induced fault slip assessment in Montney Formation in Western Canada | Scientific Reports (nature.com)

Regional Geology of the Montney Resource Play: Western Canada Sedimentary Basin. (short course description). Canadian Energy Geoscience Association. September 2023. https://www.cspg.org/common/Uploaded%20files/pdfs/documents/education/Education%20Courses/Geology%20of%20the%20Montney%20Resource%20Play_Sep.%2025-28%20F.pdf

Massive Montney play ramping up with Canadian LNG exports on the horizon. Deborah Jaremko. Canadian Energy Centre. November 17, 2023. Massive Montney play ramping up with Canadian LNG exports on the horizon (canadianenergycentre.ca)

Geochemical evidence for the internal migration of gas condensate in a major unconventional tight petroleum system. James M. Wood, Jaime Cesar, Omid H. Ardakani, Arka Rudra & Hamed Sanei. Scientific Reports volume 12, Article number: 7931 (2022). Geochemical evidence for the internal migration of gas condensate in a major unconventional tight petroleum system | Scientific Reports (nature.com)

Petroleum distribution in the Montney hybrid play: Source, carrier bed, and structural controls. Tristan Euzen, Neil Watson, Martin Fowler, Andy Mort, and Thomas F. Moslow. AAPG Bulletin. September 2021. AAPG Datapages/Archives: Petroleum distribution in the Montney hybrid play: Source, carrier bed, and structural controls

Natural mineralized fractures from the Montney-Doig unconventional reservoirs (Western Canada Sedimentary Basin): Timing and controlling factors.Aarta Gasparrini, Olivier Lacombe, Sébastien Rohais, Moh Belkacemi, and Tristan Euzen. Marine and Petroleum Geology. Volume 124, February 2021, 104826. Natural mineralized fractures from the Montney-Doig unconventional reservoirs (Western Canada Sedimentary Basin): Timing and controlling factors - ScienceDirect

XI Technologies: Montney Drilling Overview – The Top Operators & Results. March 10, 2021. Energy Now Media. XI Technologies: Montney Drilling Overview - The Top Operators & Results - Canadian Energy News, Top Headlines, Commentaries, Features & Events - EnergyNow

LNG Canada Nears Commissioning Phase for First Train, Fluor Says. Jacob Dick photo. Natural Gas Intelligence. July 11, 2024. LNG Canada Nears Commissioning Phase for First Train, Fluor Says (naturalgasintel.com)