Assessing Infrastructure Proximity of Calima Energy’s Montney Formation Asset

Montney Formation is a super-rich liquid spot, covering more than 130,000km² from north-east British Columbia (BC) to north-west Alberta, Canada, with potential to emerge as one of the top plays in Western Canada and most likely in North America.

Over the years, its importance has grown due to its ability to produce wet and dry gases, ensuring both environmental and economic benefits. The significance of the region can be easily weighed on the fact that production cost in the area is almost half than most of the Australian acreage and carbon footprint is lesser than half of the global average CO₂ emission.

Also, it is worth mentioning that the Montney Formation appears four times in Scotia Bank’s top twelve ranked North American plays for 2020.

In the same region, we have the operations of Australian-listed international oil & gas company, Calima Energy Limited (ASX: CE1). The Company has a key asset in Montney Formation, which has shown production in the top quartile with initial test production results ranking in the top quartile of the peer group of Montney wells (1,640boe/d).

Curious About Calima Energy’s Asset? Do Read Calima Energy's Asset Performance and Future Outlook

In the milieu of which, let us assess the existing infrastructure and geology in the Montney Formation region to gauge Calima Lands.

To begin with, let us start with the available infrastructure in term of Water, Power, Market or Port to mention few.

• Water: With natural gas development, demand for water increases for the fracturing process. Hydraulic fracturing involves the mixing of water and sand, which is injected under pressure to create a crack in the rocks, thereby allowing gas to flow. Also, it is worth mentioning that the distribution of water in gas reservoir influences the resource exploitation, thus estimating the reserves volume.

BC Oil and Gas Commission regulates and manages the approval of water, keeping focus on the environmental values. The organisation can suspend water access if necessary, to protect the environment. Players at the time of working must outline how the industry must protect water resources during drilling and production operations.

Peer companies like Kelt Exploration Ltd. produced around 8,000 barrels per day of water during the Sep quarter 2019. Further, Kelt has constructed a facility to reutilise the frac water and source freshwater from two large water ponds from the Kelt Inga Facility via a large diameter water pipeline. Whereas, ARC Resources, has invested around C$55 million since 2017 in water infrastructure for Montney operations to add around 700,000m³ of water storage capacity. The water management strategy for ARC has reduced consumption of freshwater by 25% amid the duration from 2017 to 2018.

• Electricity: The National Energy Board is responsible for regulating the construction and operation of designated interprovincial and international power lines.

The nearest company's operations ARC Resources use a gas power plant in partnership with BC Hydro- owned by the government and people of British Columbia. Whereas, Kelt Exploration in July 2017 announced that it had purchased an infrastructure package in north-east British Columbia, which encompasses three electric power generators, horsepower gas compressors and gas dehydration units to mention few.

• Market: Gas from Montney Formation is transported via pipelines and the Company has received approval for a pipeline construction project. Once operational, the pipeline will have a maximum capacity of 1,500-2,000 bbls/d of well-head condensate and 50 Mmcf/d of gas to the Jedney processing facility.

In milieu of which, the Company has recently executed a deal to strategically acquire Tommy Lakes Infrastructure to access the NorthRiver midstream pipeline and Jedney processing plant, which will advance CE1 to major export routes for example Alliance, NGTL/AECO and T-North/Station 2. Further, with increased capacity via the pipeline, the Company will be able to transport gas to Shell/Petronas' LNG Canada Facility via the Canada Coastal Link pipeline and the planned Kitimat LNG Facility of Woodside/Chevron.

Tommy Lakes Infrastructure Access to Regional Network

Interesting Read: O&G Price Dynamics; Optimism Lies with Calima Energy's Pipeline Capacity

• Port: Montney Formation, British Columbia, is situated near the Port of Edward at a distance of ~1,170 km. The port may aid the Company’s project in the Montney Formation for equipment supply, raw material supply, etc.

Calima Energy is well located to have easy access to the necessary infrastructure. Presently, the Company is planning to complete a Field Development Plan (FDP), promoting Calima Lands as a development ready project. CE1 is looking forward to an FID (Final Investment Decision), which is dependent on receiving funding either through project financing facilities and/or a JV partner.

Want to Know About the Company’s Strategy? Must Read: Mapping O&G Company, Calima Energy’s Strategy and Initiatives

Stock Price Information

The CE1 stock last traded at A$0.007 on 27 February 2020 with a market cap of A$15.09 million. The stock delivered 16.67% in returns in the last one month.