This backgrounder document is intended to provide a high-level overview of the Duvernay play in Alberta through assessment of the history, current activity, and potential future development scenarios for this large resource play. Some main summary points to emphasize are:
Resource vs. Reserves – even though the Duvernay formation may contain extremely large volumes of oil, NGLs and gas, so far there has mainly been exploration activity only, and very little of this resource may be technically and economically viable to produce in the near-term.
- Economically Challenged – the stand-alone economics of Duvernay production are relatively poor compared to other formations and hydrocarbon resources in the U.S. and Western Canada.
- Few Motivated Developers – the active developers are mainly focused on resource tenure, fulfilling contractual commitments, or integrated economics with other projects, rather than standalone
- Duvernay economics, so future activity levels are uncertain.
- High Costs and Uncertainties – there are many uncertainties related to costs, economics, water impacts, seismic impacts and other facets of the Duvernay development, which will discourage many companies from rushing to make any additional major investments, beyond their current commitments.
- No, or Low, Proven Reserves Assigned to the Duvernay Formation – as a result of the above issues there are no formally recognized proven reserves assigned to this formation. “Proven” reserves assigned to the Duvernay will mainly be attributed to “production already in the tank”, which was produced from exploration or evaluation wells already drilled. Some producers may assign “contingent reserves” to some Duvernay assets, but these are dependent on hydrocarbon commodity prices recovering, and further reductions in capital and operating costs being achieved for drilling and completions. To be counted as “Remaining Established Reserves” the resources in place must be demonstrated to be both technically and economically viable at current conditions on a stand-alone basis.