Australian energy company Calima said it's closer to drilling into the emerging Montney oil and gas basin in British Columbia. File photo by photostock77/Shutterstock

Feb. 6 (UPI) -- A construction permit from the provincial government in British Columbia puts drilling in the emerging Montney shale closer to reality, Calima Energy said.

Australian energy company Calima operates more than 70,000 acres in the Montney shale formation in British Columbia. The company said it's received authorization from the provincial oil and gas commission to build, maintain and operate a road into its holdings.


"The award of the road authorization represents a significant milestone as the company shifts its focus from building its land position and sub-surface geoscience towards the operational activity necessary to drill wells," Managing Director Alan Stein said in a statement emailed late Tuesday.

Oil and gas exploration since the 1950s has utilized conventional operations to tap into a basin that straddles the borders of Alberta and British Columbia. Advances in horizontal drilling and hydraulic fracturing, or fracking, have uncorked new opportunities and Calima said federal data point to as much as 449 trillion cubic feet of marketable natural gas and 1.1 billion barrels of marketable oil in the Montney formation.

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From a cash flow perspective, Calima said the Montney shale has one of the most competitive break-even costs in North America. In an independent assessment of the reservoir in October, the company said Montney would deliver "excellent returns at current prices."

Oil prices are up considerably since October.

Through a government land auction in December, the company said it increased its holdings in the Montney shale formation by 2,738 acres, or about 4 percent.

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Development could stir controversy in British Columbia. The provincial government in late January announced it was considering new regulations on bitumen, a heavier type of oil found in Canada. Included among the proposals was a restriction on transportation until the government determines what would happen if there was a spill of the thicker type of oil.