chevron canada limited moving into development in the duvernay

Chevron Canada Limited has announced it is moving into development on a portion of its lease holdings in the Kaybob Duvernay area of west-central Alberta. The decision follows a successful three-year appraisal program by Chevron.

The decision to move into initial development in the Duvernay is a major accomplishment for Chevron Canada Ltd. It reflects more than eight years of significant effort by many people across the Canada business unit toward a common goal of developing legacy assets in Canada and positioning Chevron Canada Ltd. as a major unconventional resource operator.

"We are taking a staged, scalable approach to developing our Duvernay resource position. This disciplined approach will allow us to continue to grow our production while generating significant positive cashflow and earnings for the corporation."

Alan Dunlop

General Manager, Asset Development

Jim Navratil, Kaybob Duvernay asset manager, said significant strides have been made over the past three years to reduce costs and cycle times and increase resource recoveries. Close collaboration with other Chevron business units that have shale and tight assets, in particular the Mid-Continent business units, have accelerated Chevron Canada Ltd.’s learning trajectory.

“We are benefiting directly from the experience of our colleagues in other shale and tight plays and are applying their best practices as we continue our efforts to drive down drilling, completion and facilities costs and implement a factory model approach to our business in the Duvernay,” said Navratil.

It is anticipated this initial development program will comprise approximately 55,000 acres of Chevron Canada Ltd.’s operated position in the Duvernay resource. Development drilling is scheduled to begin in the second half of 2018.

1960

In the late 1960s, field crews began exploring for crude oil and natural gas in the Kaybob area of west-central Alberta. Subsequently Chevron Canada Ltd. discovered a 53-km long natural gas field that became known as Kaybob South. At the time of its discovery, it was the largest wet-gas reservoir ever found in Canada.

1972

To develop the prolific Kaybob South field, Chevron Canada Ltd. built the largest sour gas processing plant in the world. The Kaybob South Gas Plant commenced operations in 1972. The company also constructed a bridge across the Athabasca River to link the plant to the nearby town of Fox Creek and built permanent housing for more than 100 employees.

2009

Chevron Canada Ltd. geologists examine a rock outcropping while on a field trip in northeastern British Columbia. The field trip was tied to a Chevron Canada Ltd. business strategy to develop legacy assets in emerging unconventional resource plays. In 2009, Chevron Canada Ltd. made the first of several large land acquisitions in the Duvernay formation, considered to be one of the most prospective liquids-rich shale plays in North America.

2011

Chevron Canada Ltd. begins an exploration drilling program on its Kaybob Duvernay lease holdings in 2011. The following year, the company achieves initial production from the first well in the Kaybob Duvernay Program to be tied into permanent production facilities.

2014

Following a successful three-year exploration program, the company in mid-2014 commences an appraisal program on its Kaybob Duvernay acreage to evaluate well production rates and reservoir performance. The program includes multi-well pads to minimize land disturbance.

2017

At the beginning of 2017, Chevron Canada Ltd. had more than 50 wells tied into permanent production facilities in the Kaybob Duvernay area. In November 2017, Chevron Canada Ltd. announced it is moving into initial development on approximately 55,000 acres of its 330,000-acre operated position in the Duvernay play. It is anticipated that development drilling will begin in the second half of 2018.

how we got here

Chevron Canada Ltd. has a net 70 percent operating interest in approximately 330,000 acres in the Duvernay formation. KUFPEC Canada Inc., a wholly owned subsidiary of Kuwait Foreign Petroleum Exploration Company, holds a net 30 percent nonoperating interest.

55,000

acres initial development

70%

operating interest

330,000

gross acres

“The Duvernay formation is one of the most prospective liquids-rich shale plays in North America. Chevron Canada Ltd. looks forward to realizing the value of this resource from our industry-leading position while delivering economic benefits to local communities, Alberta and Canada,” said Jeff Gustavson, president, Chevron Canada Ltd.

Chevron Canada Ltd. commenced an exploration program in the Duvernay in 2011, subsequently drilling 16 horizontal wells and completing 13 wells using multi-stage hydraulic fracturing. In the second half of 2014, the company commenced a pad drilling program for appraisal and land retention purposes. More than 50 wells have now been tied into production facilities.

In the Duvernay, Chevron Canada Ltd. is targeting natural gas that is rich with liquids, including condensate. Condensate is often blended with molasses-like oil sands bitumen to reduce its viscosity so that it can flow in pipelines.

did you know?

Condensate is a natural gas liquid with a low-vapor pressure compared with natural gasoline and liquefied petroleum gas. Condensate is mainly composed of propane, butane, pentane and heavier hydrocarbon fractions.

A chronic shortage of condensate (also known as diluent) in Western Canada to support growing oil sands volumes has forced producers to import condensate from the United States. This gives Alberta-produced diluent a competitive cost advantage due to lower transportation costs, and a premium price relative to Canadian light sweet crude oil.

deep roots

Chevron Canada Ltd.’s rich history in the Kaybob area stretches back more than 50 years. In 1957, The California Standard Company (the forerunner to Chevron Canada Ltd.) participated in a discovery in the Kaybob north area near the town of Fox Creek. The company later expanded its landholdings to the nearby Kaybob south area, leading to the discovery of a 50-km-long field that at the time was the largest wet-gas reservoir in Canada.

Chevron Canada Ltd. subsequently built the Kaybob South Gas Plant, and when it went on line in 1972 it had the distinction of being the largest sour gas plant in the world. Sour gas processing technologies and capabilities developed in Alberta were later deployed by Chevron elsewhere in the world, including Kazakhstan.

In 2004, Chevron Canada Ltd. divested its interests in the Kaybob region as part of a strategic sale of the company’s mature Western Canadian conventional oil and natural gas assets, as the business unit focused its attention on other Canadian large resource opportunities with significant growth potential.

In 2009, with a strategic vision to position Chevron Canada Ltd. in emerging shale and tight resource plays of scale, the company returned to the Fox Creek area, making the first of several large land acquisitions that now comprise the company’s Kaybob Duvernay Program.

For more information on the Kaybob Duvernay Program, please visit Chevron Canada Ltd.

About Chevron Canada Ltd

Since 1938, Chevron Canada Limited has been exploring for, developing, producing and marketing crude oil, natural gas and natural gas liquids. Headquartered in Calgary, Alberta, Chevron Canada Ltd. has interests in oil sands projects and shale acreage in Alberta; exploration, development and production projects offshore Newfoundland and Labrador; a proposed liquefied natural gas (LNG) project and shale acreage in British Columbia; and exploration and discovered resource interests in the Beaufort Sea region of the Northwest Territories.

Cautionary Statement

Published: December 2017