EnCana Corp. executive talks about shale gas in northeastern British Columbia

Richard Dunn, vice-president of regulatory and external relations, talks about emerging shale plays in B.C. and what can be learned from activity in Texas' Barnett Shale formation

By Gordon Jaremko

August 01, 2009

Alberta Oil: How big will shale gas become in B.C. as conventional supplies deplete in Alberta, where the Energy Resources Conservation Board’s latest forecast predicts an annual average production decline of four per cent?
Richard Dunn: It’s not inconceivable that, within the next decade, B.C. and Alberta will be the same or B.C. will be overtaking. There is a renaissance of natural gas. Nine gas resource plays are developing in North America. All are unconventional. In my 30 years in gas, we’ve never seen such a change. The Barnett Shale went from less than one billion cubic feet per day to more than four billion in about three years. You could fit two or three Barnetts into the Horn River formation.

AO: What does this supply surge mean for markets?
RD: Commodity prices are going to be modest at best for the foreseeable future. It’s not an unlimited supply but it’s certainly one that can overwhelm demand. Yet this also makes it possible for consumption to resume growing. We’re thinking natural gas vehicles, for instance. We’re thinking coal displacement in power generation.

AO: How can you grow unconventional production on slender prices?
RD: These are good quality plays. We believe we can be a low-cost and very competitive operator. It’s all about a manufacturing-style process and driving your costs down, incrementally getting more out of wells for fewer dollars. The drilling and completions are repetitive. You get more efficient. That’s the magic
of a resource play.

AO: What role is played by B.C.’s new clone for gas of the royalty regime that Alberta uses in its oil sands?
RD: The net profit royalty is extremely important for an area that’s just emerging. It’s a regime that takes the government revenue share when a project is profitable, as opposed to the old classic policy that takes it up front. It is a key to making the Horn River play fundable.

AO: Did industry have a hand in B.C.’s policy?
RD: Absolutely. One of the hallmarks of B.C. is that they’ve been very open to dialogue with industry. We’ve been working on this and making sure we got it right for about three years. The timing’s a stroke of good fortune. The Horn River gas was a surprise. Everybody knew the shale was there. It was just 300 meters of something you drilled through. All of a sudden, in a well going for another target, we got the big kick [sudden flow] – 10 million cubic feet a day. That catches your attention.

AO: Is industry trying to obtain a favorable gas royalty for Alberta’s even bigger shale formations?
RD: I would never slag Alberta. I think Alberta’s trying hard. Alberta’s working really hard on reversing the decline in its gas production.

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