​Hello, 2.4 billion barrels+: Duvernay economics encouraging at today’s prices

Map: National Energy Board

“Lower forever” oil and gas prices may take a chunk out of how much oil and gas will be produced from Alberta’s emerging Duvernay play, but the numbers of what’s left are still pretty staggering.

The National Energy Board published a new energy briefing on Friday outlining the economic potential of the play with oil at C$60/bbl (US$47/bbl) and natural gas at C$2.50/GJ (US$1.97/GJ).

Under this pricing scenario, the NEB estimates about one-third of Duvernay marketable oil resources to be economic, about 16 percent of its marketable natural gas resource and about one-fifth of its marketable natural gas liquids resource.

That’s 1.0 billion barrels of oil, 1.4 billion barrels of natural gas liquids and 12.0 trillion cubic feet of natural gas.

The new report applies economics to the “marketable” Duvernay resource analysis the NEB released in September; applying 2017 oil pricing and an assumption of a 10 percent internal rate of return on the total amount of sales-quality petroleum that could be recovered.

Should well costs continue to fall and crude oil and natural gas prices modestly rise, the NEB estimates that economic Duvernay oil resource would increase to 2.2 billion barrels, natural gas liquids to 3.4 billion barrels and natural gas to 32.9 trillion cubic feet (see chart).

“Duvernay Shale economics are very sensitive to declines in well costs. As well costs fall, increases to oil and gas prices cause economic resources to grow more rapidly than they would with higher well costs,” the NEB said.

“Well performance that improves at the same scale of falling well costs would likely affect economic resources in a similar manner.”

Oil and gas producers began testing the Duvernay play in 2011.