BRISBANE, Australia -- Petronas is developing a “world class resource” in the North Montney gas play as part of an ongoing expansion of its unconventional resource portfolio, whose initial investment was in the coal seam gas assets and liquefaction plant of the Gladstone LNG project in Queensland, attendees at Hart Energy’s DUG Australia conference heard last week.

Malaysian government-controlled Petronas has set a goal of unconventional production making up some 10-15% of overall production by 2020, according to Jim Stannard, vice president, unconventional, upstream international with Petronas. With Petronas’ production running at more than 2 million barrels of oil equivalent per day (boe/d), this would represent 250,000 boe/d at the midpoint of the target range.

Stannard recounted Petronas’ journey into the unconventional resources sector. Petronas acquired its 27.5% in Gladsone LNG in 2008, and went on to purchase a 50% interest in a joint venture in the North Montney gas play with Canada’s Progress Energy Resources in 2011. The Malaysian national oil and gas company agreed to acquire 100% of Progress Energy the following year. Since then, it has also bought Montney assets from Talisman Energy.

In addition, Petronas has set up PUNCH (short for Petronas Unconventional Hydrocarbon Centre) to provide training in unconventional resources for its staff in Malaysia.

Stannard, who joined Petronas with its purchase of Progress Energy in 2012, said its North Montney play was “by far the largest” of its three unconventional resource assets in Canada. He noted that more than 2,500 horizontal wells have been drilled by the industry in the Montney play, and production from the Montney currently exceeds 4 billion cubic feet per day (Bcf/d). Canada’s National Energy Board estimates the Montney play’s potential recoverable resource at 450 trillion cubic feet (Tcf).

In its North Montney area, Petronas has a dominant land position with more than 600,000 acres. Petronas alone has 25 operated rigs currently running through its Progress Energy subsidiary, and it can drill more than 200 horizontal wells per year. With a 300-meter-thick sand package, horizontal wells can be drilled into up to four separate intervals in the Montney, with spacing at 16 wells per section. Wells typically have initial production rates of at least 2 million cubic feet per day (MMcfe/d), said Stannard. Liquids content is about 20 barrels per million cubic feet.

As of February 2014, Petronas had drilled 280 wells in the play, with three wells drilled per pad during the appraisal phase. Of these, 180 were on production, with output running at about 400 MMcf/d. According to a study by DeGolyer McNaughton, gas-in-place is estimated at about 200 Tcf. Assuming a recovery factor of 25-30%, and an inventory of 13,000 well locations, this represents a prospective resource net to Petronas of 50-60 Tcf. In terms of appraisal drilling to prove up reserves, Petronas’ practice has been to drill three to four wells every three to four miles in the play.

The North Montney gas is targeted to supply a British Columbia liquefied natural gas (LNG) facility. A final investment decision (FID) for the facility, Pacific NorthWest LNG, is scheduled for the end of 2014. Petronas has targeted 15 Tcf of reserves by year-end to make an FID, and earlier this year it said it had proved up about half of the targeted reserves.

During 2015, operations are expected to transition from step-out drilling to pad drilling, with production expected to ramp to 2 Bcf/d by 2018, when first LNG exports are expected. TransCanada is handling the infrastructure needed to transport the gas to the western Canadian coast, some 600 kilometers away.

Outside North America, Stannard identified four emerging basins that offered positive outlooks for unconventional development. These included India and China, although they both have various surface issues, and Australia, which he said is struggling with a “chicken and egg issue” as far as oilfield services are concerned. He is most optimistic on Argentina’s Vaca Muerta play, which “seems to be the next emerging really large play outside of North America.”

Stannard drew a parallel with ExxonMobil’s relationship with XTO Energy, which ExxonMobil bought principally for its unconventional resource expertise but has largely allowed it to operate independently. Petronas expects Progress Energy to maintain “that lean, cost-conscious mindset,” he said.