A representative from Shell Canada outlined the company’s current and future gas development activities in the Groundbirch area to directors at Thursday’s Peace River Regional District meeting in Fort St. John.

“We are trying to be really transparent,” said Andrew Dahlin, Shell’s B.C. Operations Manager.

A handout presented to the directors was not, however, made available to media as Dahlin explained it contained information that might put Shell at a competitive disadvantage.

“In 2008 Shell decided to enter Groundbirch. We bought Duvernay Oil Company and we acquired a ton of land through crown sales,” he began.

Groundbirch is an area located between Fort St. John, Dawson Creek, Hudson’s Hope and Chetwynd. Shell holds the rights to about 300 sections of land in the area.

The current focus is on the Montney reservoir, Dahlin said.

It is a unconventional reservoir of siltstone containing sweet gas.

Low porosity rock with few natural fractures requiries a process called fraccing, which involves pumping water into the rock at very high pressures to create fractures through which the gas can flow. Additives are put in the water, including sand which keeps the cracks open when the pressure is removed, he explained.

Dahlin said to date over 150 wells from 40 wellsites or pads have been drilled. Currently there are five gas plants producing 110 mmscft/day of gas which is enough to heat 400,000 homes. There are plans in place to drill an additional 60 wells over the next year.

An expanded Groundbirch/Montney plant is slated to be operational by November.

Dahlin addressed concerns over the reduction in the number of local contractors used in their operations in the area since acquiring Duvernay.

“They had 2,000 contractor firms working for them and some were handshake deals. We don’t operate that way. We reduced that contractor base from 2,000 to 600. So there were people that were getting a much larger chunk of our business (but) unfortunately there were 1,400 contractor firms that now have no business.”

He said currently Shell uses about 50 per cent local contractors.

Dahlin said that concerns over water use in the fraccing process fall into three categories: source, transportation and consumption.

“A lot of it is coming from fresh resources, the Peace River and the Kiskatinaw River etc,” he said.

A recent partnership with Dawson Creek will see reclaimed water shipped through a soon-to-be-built pipeline, he added.

“We are going to build a 50 kilometre pipeline from Dawson Creek into the Groundbirch area. We are going to build enormous swimming pools for reclaimed water and pipe it out to the well sites. After the fraccing, it is produced back after gas production. It goes back to the swimming pool in the pipeline where it is treated and shipped out again,” Dahlin said.

“That way we are hoping to get away from this continuous draw on a fresh water resource.”

He said Shell is putting a lot of funds behind this project.

“It is a massive investment. The $9.75 million investment into the Dawson Creek project and the pipeline is probably [worth]$50 million. Economically it makes sense to Shell to do it too but the other benefits are actually what is really driving the project. We think we can take 80 water trucks off the road every single day.”

Reclaiming water is also a priority to Shell, he said.

“Typically of all the water we pump down we get 20 to 40 per cent back in the first couple of weeks of production. As your production declines your water declines. If I was to guess at this point we would get 80 to 90 per cent of the water back [over the long term].”

Groundbirch activity will require a joint investment by Shell and the government to upgrade roads to accommodate industrial traffic, he said.

The existing road network is not suitable for the operation as they were not designed for the loads or volumes of heavy vehicles.

Residents are concerned about the conditions of the roads, dust, road safety etc. New roads will be needed for the new sites, he added.

Dahlin said Shell is currently working with the Ministry of Energy, Mines and Petroleum Resources and the Ministry of Transportation on these issues.

The issue of royalties was addressed.

He said, despite what some people believe, “our royalty payments are double digit percentages. Long term we are modelling 25 per cent.”

“The incentive scheme is aimed at getting some of that capital back through a royalty break. The well will produce for 40 years but the incentives are typically capped for the first year so for the next 39 years you are actually up at the higher royalty rate. In fairness, our highest production is in the first year.”

He said the company is taking steps to reduce the footprint of its activities including the use of pad drilling which “minimizes the number of wells, pipeline right of ways and roads that are required to develop the field.”