Encana Corp. will scale back drilling and production in the Montney play in 2016 in the face of low oil and gas prices, focusing instead on processing and moving the gas it has.
The company gave a presentation on its plans for the coming year at a Peace River Regional District meeting Thursday.
It will drill on a relatively modest five to eight well pads in 2016 in the South Peace area, with between two and four wells per pad.
However, it plans to continue upgrading gas plants, compression stations and pipelines in the South Peace to better move its gas around Western Canada.
“With the present price environment that we’re in, we’ve definitely reduced our activity in the Dawson Creek area, and it will continue to be reviewed as the year goes on,” said Encana spokesperson Brian Lieverse.
Encana is among the most active drillers in the South Peace, having drilled 531 wells in the area since 2004. Where the gas will go remains to be seen. Encana’s Cutbank Ridge partnership with Mitsubishi would supply gas via pipeline to LNG Canada, a liquefaction and export facility proposed in Kitimat. The proposal has yet to receive a final investment decision.
For now, much of the gas produced in South Peace will go to storage facilities in Alberta via an expanded pipeline.
“The entire industry is hopeful for LNG on the West Coast, definitely, but we also need to move forward with other possibilities,” Encana’s B.C. infrastructure co-ordinator Jason Blanch told the board. “Right now, the avenue is to send that gas through the Groundbirch expansion (pipeline) into Alberta and to sales that way.”
“Personally, I remain hopeful LNG will happen and we can send our gas that way.”
The company hopes to grow its compression and processing capacity in the coming years, building four to five gas processing plants, with on-stream dates set between late 2016 and the end of 2018. It is also upgrading its South Peace water hub, which converts salty ground water for use in hydraulic fracturing
Also on the docket are two regional pipelines to expand processing capacity.
This February, the company sold pipelines and seven compressor stations to Veresen Midstream to focus on drilling. Encana will continue to operate the facilities on the company’s behalf.
Faced with crashing oil and gas prices, it cut spending in the Montney in February by around $130 million.
A major worker camp outside Dawson Creek to house Encana staff was downgraded from 2,500 people to 1,200 earlier this year. According to Blanch, 271 people are currently living on site.
The Montney around Dawson Creek is one of Encana’s four North American plays.
Lieverse said the company would continue to review spending in the region as the year goes on.
“It’s been kind of a step down,” he said of drilling plans for the coming year. “We did less in 2015 than we did in 2014, and we’re doing less in 2016 than we did in 2015.”