Montney Producer Welcomes LNG Canada FID

Canada-focused Calima Energy is preparing to drill one vertical well and two horizontal wells in its siltstone Montney project area, it said October 4, following the news of the final investment decision taken by LNG Canada October 2.

Calima has been building up acreage relatively cheaply  in the area, noting that a quarter of the output is oil, in energy terms, and the gas price does not need to be high to make it worth producing; selling it for liquefaction would provide a long-term revenue stream. 

CEO Alan Stein said Calima is "in a robust financial position being funded to undertake its first drilling campaign on the Calima Lands. The Calima Lands comprise 72,000 acres of drilling rights considered prospective for the Montney Formation which is now the biggest oil and gas play in Canada."

The vertical well will provide stratigraphic calibration and valuable core data while the two horizontal wells will be put on extended production test.

Stein said the go-ahead for LNG Canada was very positive news, with the its 72,000 acres of Montney rights immediately adjacent to the proposed pipelines that will feed the new LNG projects at Kitimat.

“Opening up the Montney to new international markets with crude based pricing is great news for producers and resource owners,” he said. “With four additional LNG projects already approved by the Canadian government more FIDs are expected to follow. Prices for Montney drilling rights appear to have risen sharply this year and we expect that trend to continue on the back of this news.”

A review of infrastructure opportunities in the Montney undertaken by Calima Energy earlier this year identified LNG Canada as potentially providing significant benefits for its project development plans. Drilling will be funded by the recent completion of an A$25mn ($18mn) oversubscribed placement.