(Energy Analytics Institute, 29.Nov.2024) — The Montney Shale, nestled within Canada’s Western Canada Sedimentary Basin (WCSB), is emerging as a key player in North America’s unconventional oil and gas sector.
This prolific resource has long been a cornerstone for Canadian energy giants—ARC Resources, Canadian Natural Resources Limited (CNRL) and Tourmaline Oil Corporation—but its immense potential has also drawn the attention of US-based companies like ConocoPhillips, Murphy Oil Corp. and Ovintiv Inc.
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What make the Montney is its double-digit internal rates of return (IRRs) and a vast inventory lifespan that rivals the Permian Basin. That said, the formation continues to be dominated by Canadian players with an additional small presence by some key Asian players.
This as the Montney, primarily a condensate-rich natural gas formation spanning northwest Alberta and northeast British Columbia, offers producers a multifaceted advantage: condensate, gas, and crude oil.
The Montney’s geology
The Montney formation was deposited during the early Triassic over 247 million years ago. The eastern margins of the Montney were deposited along a bow-shaped shoreface, according to the Alberta Energy Regulator (AER).
The depositional environment transitions from the shoreface in the east to the offshore in the west. The lithology of the Montney includes sandstones and dolostones in the east and mainly fine sandstone to siltstones in the west. The formation is nearly 300 m thick in the west, thinning to a zero edge in the east and ranges in depth from about 700 m in the northeast to 3,500 m in the southwest as measured from the ground surface to the formation top. In the thicker areas of the formation, companies are targeting multiple layers, according to the AER, which has subdivided the Montney Formation into five plays: Beaverlodge, Grande Prairie, Rycroft, Grimshaw, and Valleyview.
Its versatility and deep reserves have positioned it as an alluring alternative for operators seeking sustained growth and diversified production options. The top five producers in the Montney—ARC, Tourmaline, Ovintiv, CNRL, and Malaysia’s Petronas—currently account for around 59% of the plays output in 2024, according to Wood Mackenzie.
A bright future
With some 170 trillion cubic feet (Tcf) of gas in place, the Montney is a dominant force in Canada’s gas supply. Currently producing nearly 10 billion cubic feet per day (Bcf/d), it represents over half of WCSB’s total gas output. Wood Mackenzie expects production in the Montney could reach 15.3 Bcf/d by 2030, comprising nearly 66% of WCSB’s supply.
Despite challenges with market access and pipeline approvals, the Montney has consistently outperformed expectations. Its sub-$50/bbl breakeven costs make it a competitive player, even against the US Delaware Basin. Liquids-rich areas within the Montney boast breakevens as low as $45/bbl, supported by efficient infrastructure development and advances in technology.
In the Canadian gas space, recent advancements in LNG infrastructure are positioning the Montney for long-term growth. Projects like LNG Canada, Cedar LNG, and Woodfibre LNG promise to unlock new export opportunities and stabilize local gas prices.
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In the Canadian oil space, the expansion of the Trans Mountain Pipeline (TMX) to a capacity of 890,000 b/d has enhanced the country’s ability to access global markets and attract investors.
With a long inventory life, low costs, and expanding market access, the Montney is poised to continue its ascent as a major driver of North America’s energy landscape.
For investors looking at the Canadian energy sector, the Montney represents a compelling blend of stability, growth, and innovation.
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By Pietro D. Pitts, guest contributor. © Energy Analytics Institute (EAI). All Rights Reserved.
