logo-loader

Calima Energy playing key role in journey to net-zero greenhouse gas emissions

Published: 19:11 21 Sep 2021 EDT

Calima Energy Ltd - Calima Energy playing key role in journey to net zero greenhouse gas emissions

Calima Energy Ltd (ASX:CE1) is set to play a key role in the global energy transition and the pathway to net-zero greenhouse gas emissions, thanks to its landholding in the globally significant Montney Formation in western Canada.

A major source of natural shale gas and tight oil covering some 130,000 square kilometres, the Montney has marketable gas reserves of an astonishing 567 trillion cubic feet (TcF).

To put that in context, the US Energy Information Administration estimated that there were 7,257 TcF of proven gas reserves in the world at the start of 2020; Montney, then, would account for nearly 8% of global gas reserves.

And ASX-listed gas producer Calima owns 60,000 acres of drilling rights just to the north of a bend in the Sikanni Chief River and a short distance east of the Alaska Highway.

Calima in the Montney

“It was a geological hunch based on some innovative mapping that took Calima into the backwoods of British Columbia,” the company says in its latest letter to investors about the Montney.

“Three wells later it seems the hunch was correct and the Montney liquid’s rich fairway now extends further north than before.”

As covered by Proactive, Calima sees major potential in the Montney, thanks to the ample oil and gas to be found beneath the surface.

And with governments the world over making a shift to cleaner and greener technologies - as well as renewed interest in oil and gas - Calima believes it is in the right place at the right time.

The Calima Lands boasts contingent 2C resources - 2C is a “best estimate” of oil and gas resources - of around 890 BcF of gas and 44.5 mmbbls (one million oil barrels) of light oil in the Upper and Middle Montney. 

“Both zones were tested by horizontal wells - the Lower Montney was intersected by our vertical well and independent analysis of the core recovered in that well suggests there will be additional potential in this zone also,” Calima says.

“Our drilling results stack up favourably against the regional peer group.”

In 2019, when Calima started drilling its wells, Montney gas was selling for less than C$2 per gigajoule and condensate was worth less than $50/barrel. 

But now, in the northern autumn which is not a premium pricing season, Montney gas is selling for C$4.45/GJ and futures contracts for the remainder of 2021 are now above C$4/GJ, while condensate is worth US$60-70/barrel. 

So, what’s next?

Calima’s resources are large and there is plenty of scope for upside - its focus in recent months has been on its plans for oil and gas beneath its feet.

“Fortunately, a year after drilling, we were able to acquire the Tommy Lakes infrastructure package comprising 30 kilometres of pipelines, three compressor stations, an accommodation camp and a tie-in to a 12-inch sales gas line immediately to the north of our lease,” the company says. 

“The infrastructure is capable of handling 50mmcf (one million cubic feet) of gas per day and 2,500 barrels per day of condensate and the sales line that the Tommy Lakes facilities connects to has capacity to accommodate future expansions.

“These facilities have a replacement value of A$85 million which will be a useful kick-start when development is sanctioned.”

“We have the permits in place to construct the pipeline to tie-in our Montney wells to the Tommy Lakes infrastructure and the tie-in could be completed in one winter season, with the facilities being restarted within the same timeframe.

“Having secured the Tommy Lakes infrastructure some of our contingent 2C resources were then upgraded with approximately 217 Bcf and 10.8 mmbbls elevated into the higher Development on Hold category.”

Calima says once it secures funding, these resources could be classified as 2P Reserves - proven and probable.

Maximising value

The company is currently identifying and considering potential alternatives to maximise the value of its Montney assets, which could include an asset sale, joint venture, asset exchange or other potential transactions.

Calima CEO and president Jordan Kevol told investors last week: “Our Montney acreage is a material long-life asset with significant resources and upside in a proven basin that is currently the centre of activity in gas consolidation in Canada.

"With the commissioning on LNG Canada by SHELL drawing nearer and continued strength in gas prices, we feel that now is the time to either find a strategic partner to fund the development or to monetize the asset.

“Calima continues to undertake its drilling campaign on the Blackspur lands in Alberta and looks forward to updating stakeholders on the progress of its Leo drilling campaign in the Thorsby area.”

The green future

Calima bills itself as an “environmentally responsible” oil and gas producer, as it aims to “preserve and protect the environment and the communities in which we work and live”.

The gas tested by the Calima wells was clean and low in known pollutant carbon dioxide.

The sales gas line that connects into the Tommy Lakes infrastructure provides a direct link to the pipelines that will supply gas to the LNG terminals being built and planned on the west coast that will use hydropower to deliver the world’s lowest emission liquefaction facilities.

Calima’s wells also produced light oil or condensate which is sought after by the heavy oil producers in Alberta’s oil sands play - recently, a group of oil companies that account for up to 90% of heavy crude production in Alberta have recently committed to reach net-zero emissions by 2050.

“We have been able to secure a substantial resource base in the liquids-rich zone of the Montney as well as access to infrastructure that can connect the Calima resource to local and international markets,” the company says.

“Therefore, we are ideally situated to supply our clean Montney gas to the world’s lowest emission LNG terminals in the west and its Montney condensate to heavy oil producers heading towards net-zero emissions in the east.”

- Daniel Paproth

Xeris Biopharma Surpasses 2023 Expectations with Strategic Moves Poised for...

Xeris Biopharma CEO Paul Edick joined Steve Darling from Proactive to share news the company had a successful 2023, with a final tally of 164 million USD, which is at the upper end of their forecast. The company concluded the year with 72 million USD in cash, surpassing their initial projections...

7 hours, 56 minutes ago