The Montney Shale is an emerging unconventional resource play in Canada that has been attracting more attention and capital from the industry over the last few years.

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The Montney Shale is located in Western Canada and underlies major portions of British Columbia and Alberta. The Montney Shale is a natural gas play at depths between 5,000 and 7,500 feet. There are four separate intervals in the Montney, with most of the industry development focused on the upper and lower zones.

Resource Royalty
Royal Dutch Shell (NYSE:RDS) is one of the more active players in the Montney Shale, and acquired its initial interests here through the purchase of Duvernay Oil in 2008. The company has also leased additional acreage on its own and has a 20-year inventory of 3000 locations to develop.

Royal Dutch Shell is currently focused on the Groundbirch project where it is developing the upper Montney. This interval produces mostly natural gas, but the company estimates that each well here will produce between five and 10 barrels of condensate for every million cubic feet of natural gas.

Hard-Working Talisman
Talisman Energy (NYSE:TLM) is also busy developing the Montney Shale on its acreage in Alberta. The company has 271,000 net acres and estimates that it has 3000 locations in what the company considers the tier one section of the play.

Talisman Energy has allocated $450 million in capital to the Montney Shale in 2010, and the company estimates that by the end of the year it will be producing between 40 and 60 million cubic feet per day in natural gas.

The Farrell Creek development is one area that Talisman Energy has been working on. The company has 900 locations on 57,000 acres and estimates that each well will have an estimated ultimate recovery of five billion cubic feet equivalent. Montney wells here are estimated to produce an average of 4.5 million cubic feet equivalent per day during the first thirty days of production.

Other Montney Players
Murphy Oil (NYSE:MUR) is also active in the Montney Shale and has 140,000 net acres in the play. The company has three rigs working at the Tupper West project, and has drilled seventeen horizontal wells to date here.

Murphy Oil has an aggressive two-phase development program here. Phase one involves the drilling of 275 wells to access 900 billion cubic feet in resources. Phase two starts up in late 2011 and will entail another 244 wells and 728 billion cubic feet of natural gas.

EnCana (NYSE:ECA) has extensive holdings in Western Canada and estimates that its production from here will reach 600 million cubic feet equivalent per day by 2014.

The Bottom Line
The Montney Shale is one of many unconventional resource basins that is getting the attention of the exploration and production industry as it seeks to grow production and reserves at a low cost. (For related reading, take a look at our Oil And Gas Industry Primer.)

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