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Chevron Canada Awards Calgary’s Pembina a Duvernay Infrastructure Franchise

A 20-year Alberta shale gas liquids processing and transportation deal announced Thursday has potential to sire a multibillion-dollar chain of high-volume facilities, Calgary-based Pembina Pipeline Corp. predicted.

Chevron Canada granted Pembina the service franchise for a 936-square-kilometer (360-square-mile) northern swath of the Duvernay formation known as Kaybob. The deal enables Pembina to build and operate field infrastructure as supply development evolves.

Pembina Vice President Jaret Sprott said, "Industry has made significant strides in improving the economic viability of the Duvernay, and we are looking to further this progress by building a large-scale, strategic, integrated network of assets.”

Neither company specified when high-volume production development would begin. Targets and methods remain in the economic evaluation stage, with trials under way of adapting horizontal drilling and hydraulic fracturing to the formation.

The Kaybob rights are a Chevron legacy property near Fox Creek in northwestern Alberta, where vertical wells have tapped conventional gas and oil pools for generations.

The Kaybob area is also the best-known slice of the Duvernay, a shale layer up to 99 meters (327 feet) thick that carpets 130,000 square kilometers (52,000 square miles) of western Alberta along the eastern side of the Rocky Mountains. Other slices of the vast formation are under evaluation by senior firms such as Encana Corp. and Shell Canada.

A mid-2016 assessment by the resource appraisal arm of the Alberta Energy Regulator (AER) affirmed that the Duvernay stands out as a Canadian shale gas and byproduct liquids mother lode.

Proven and probable reserves to date were estimated to be 1.2 Tcf of gas, 164 million bbl of byproduct gasoline-like condensate, and 38 million bbl of oil.

But vastly greater potential supplies await advanced fracking technology.

“The total in-place resource endowment for the Duvernay ranges from 350 to 540 Tcf of natural gas, seven to 16 billion bbl of natural gas liquids, and 44 to 81 billion bbl of oil,” said the AER report.

Like Pembina, Chevron and all other participants in the emerging Duvernay Shale play, the provincial earth-sciences specialists do not yet predict the eventual scale or pace of development because commercial knowledge of the formation is limited.

“The amount of this resource that can be economically recovered is dependent on drilling and completions optimization, cost reductions, expected liquids yields, commodity pricing, and social, environmental, and regulatory constraints,” AER said.

“Operators working in the Duvernay continue to drill new wells within the liquids-rich regions of the resource,” the provincial gas- and oilfield watchdog said. “As the understanding of this complex resource continues to improve, and new breakthroughs in technology are discovered, further costs savings are being realized. As development continues, operators can delineate optimal geological areas and unlock the liquids potential contained in this resource.”

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