Choosing NGL over GTL

Talisman opts out of gas-to-liquids plant to focus on liquids-rich gas

Talisman Energy is turning its focus to liquids-rich resources in Alberta's Duvernay field and the Eagle Ford play in Texas, since opting out of a plan to develop a gas-to-liquids (GTL) facility associated with their Farrell Creek natural gas holdings near Hudson's Hope, British Columbia.

Talisman announced a joint venture agreement with South African oil company Sasol in December, 2010 that included Sasol receiving a 50 per cent interest in the Farrell Creek operation and a plan to explore the feasibility of building a GTL plant to transform Montney formation natural gas into liquid fuels. That deal was quickly followed by the March, 2011 announcement that Sasol was acquiring a 50 per cent interest in Talisman's Cypress A operation.

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"This transaction allows Talisman and Sasol to unlock additional value in the world-class Montney shale play and potentially accelerate development of the resources in the area," said John Manzoni, president & CEO of Talisman, at the time of the Cypress A announcement.

"The Cypress A assets are very similar to Farrell Creek and, with our partner, we will now build an integrated long-term development plan for the area," he added.

The GTL portion of that plan is no longer in the cards.

"Talisman participated in Sasol Canada's feasibility study for a GTL facility," said Talisman spokesperson Berta Gomez. "And after careful consideration, we concluded that there are better ways to allocate capital in support of our strategy.

"Talisman's immediate focus is to accelerate investment in near-term liquids opportunities, with the goal of increasing liquids and oil-linked gas production to 300,000 barrels a day by 2015."

The plan to jointly develop resources at Farrell Creek and Cypress A with Sasol remains intact, but the Montney play isn't presently a strong focus for Talisman.

"The Montney is a large, strategic asset for the company with a contingent resource of 29 tcfe (trillion cubic fee equivalent)," said Gomez.

However, there are other factors at play besides the quality or quantity of the resource.

"Given the decline in North American gas prices, Talisman has cut spending here in order to focus on the liquids -rich opportunities in our portfolio," Gomez added, noting that those opportunities are in the Duvernay and Eagle Ford plays.

"Together with Sasol," she continued, "we have decided to slow down expenditure to three-rig program, allowing us to continue to deepen our understanding of the Montney, reduce our [drilling and completions] costs and optimize the ultimate field development plan."

Talisman is projecting an average net production of 60 to 75 million cubic feet equivalent per day (mmcfe/d) from the Montney in 2012.

"We will also continue to delineate the area for liquids-rich gas. As we move east in the area, we have observed liquids yields of up to 35 barrels per million cubic feet," said Gomez.

"Our Montney position provides an enormous amount of flexibility to be able to ramp up at the appropriate time," she added. "Although we have exited the GTL study, we continue to examine gas monetization options, including LNG (liquefied natural gas) and gas to power."

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