Canada enters global market with first LNG shipment to Asia
Montney operators in northeast B.C. have an inventory of drilled but uncompleted wells (DUCs) and unutilized well licences ready when the call on supply comes from LNG Canada.
But right now, they are keeping their powder dry as low prices have stalled activity, and production is declining.
The first train of Phase 1 of LNG Canada came online in late June, requiring approximately one bcf/d of incremental production, with the second train anticipated to be commissioned in early 2026, adding another one bcf/d of demand.
But with AECO/NGX averaging only $2.05/GJ in the first five months of 2025, and Spectra Station 2 prices regularly less than $1.00/GJ, and sometimes reaching zero on spot markets, activity has slowed across northeast B.C.
Spuds down in first half of 2025
The spud count declined by 40 per cent in the first quarter of 2025 compared to the same quarter in 2024, according to geoLOGIC systems ltd. data. One hundred and eighty wells were spud in the first quarter of 2024, compared with 108 this year. And the decline has continued into the second quarter.
The two largest owners of LNG Canada, Shell Canada (40 per cent) and Petronas Energy Canada (25 per cent), have both had limited activity in early 2025.
Petronas spud 22 wells in the first quarter of 2025 compared to 30 wells in the same quarter of 2024.
Shell hasn’t spud a well since the third quarter of 2024, when it drilled 40 wells.
PetroChina (15 per cent), Mitsubishi (15 per cent) and KOGAS (five per cent) are the other LNG Canada owners. PetroChina also has a 20 per cent non-operated stake in Shell’s Groundbirch upstream operations.
Supply declines as drilling retreats
The supply buildup has also reversed. B.C Montney production grew from approximately 6.93 bcf/d at the beginning of 2024 to exit the year at 7.61 bcf/d, according to gDC Production Analysis. At the end of April 2025 production averaged 7.38 bcf/d.
Shell’s production averaged 500 mmcf/d, with Petronas averaging 1.1 bcf/d.
Mitsubishi has a 40 per cent non-operated stake in Ovintiv Canada’s B.C. Montney operations (through the Cutbank Ridge Partnership) that could meet some or all of its share of supply. Its non-operated share of production was approximately 573 mmcf/d.
ARC Resources also has a deal with Shell Canada to supply 150 mmcf/d to LNG Canada. The supply is expected to come from its dry gas Sunrise area. ARC’s B.C. Montney production averaged about 850 mmcf/d in April.
Shell said early in 2025 that it would buy gas to meet some or all of its share of supply if prices remained low. It is possible other LNG Canada owners could do the same, depending on if their market diversification and hedging strategies and realized prices provide better margins for their own production.
Lots of DUCs inventory available
Both Shell and Petronas have also built backlogs of DUCs that could feed the liquefaction plant.
Petronas has 33 DUCs from wells drilled since the start of 2024, according to the gDC DUC Dashboard. It has 11 wells at Town, five wells in the North Montney, 11 wells at Caribou, and five wells at Julienne Creek ready for completion.
Shell has 27 DUCs, including 21 at Groundbirch and six in the Sunset Prairie field.
Unutilized approved licence inventory is available for long-term supply
Both operators also have large inventories of well licences on hand to build and maintain their share of production once LNG Canada begins operations, despite ongoing challenges with First Nations in the region.
Shell has licensed 156 wells since the beginning of 2024, drilling only eight per cent of these licences, leaving 143 remaining.
Petronas has licensed 296 wells, drilling around 20 per cent of the approved licences granted in the same period, with 233 unutilized.
Well productivity could limit number of wells needed to supply LNG Canada
Improved well productivity across the Montney could limit the number of new wells needed to be brought online to fill and maintain LNG Canada capacity.
Shell reported IP90s of approximately 12.4 mmcf/d on 27 wells at its prolific dry gas Groundbirch play brought online since 2024.
Petronas has seen similar success in its less productive North Montney area, although it has been targeting the condensate-rich window. Petronas reported IP90s of 6.3 mmcf/d on 93 wells that were brought on in the same period. But 84 wells also had an average IP90 condensate production rate of 112 bbls/d.
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