May 10, 2004

Manitoba’s oil and gas industry will benefit from a five-year extension to the Manitoba Drilling Incentive Program and improvements to the program,  Industry, Economic Development and Mines Minister Scott Smith said today in a Mining Week announcement.

The program, which offers incentives for drilling new, deeper horizontal oil wells, is being extended to Jan. 1, 2009.

“These enhancements to the Drilling Incentive Program, along with our other advantages—the availability of Crown land, low drilling density, and low drilling and production costs, make Manitoba an attractive place to pursue oil and gas investment opportunities,” said Smith. “Extending and enhancing our incentive program will lead to more drilling activity and therefore new oil and gas discoveries.”

Improvements to the Manitoba Drilling Incentive Program have been designed to provide a Crown royalty and production tax free period, known as the holiday oil volume, for every well drilled in the province; better access to credits in a company’s holiday oil volume account; and expanded access to incentives for well enhancements that improve the flow of oil and extend the life of the product.

Specific changes include:

• For new vertical wells, a minimum of 500 cubic metres of holiday oil can now be produced before Crown royalty or production tax is paid.

• The volume of holiday oil that can be assigned from a company’s account to a newly drilled well has been increased. The holiday oil volume earned by a new well can now be “topped up” to 3,000 cubic metres.

• There is a new incentive for drilling new horizontal legs from existing horizontal wells. New horizontal legs qualify for a holiday oil volume of 3,000 cubic metres.

• There is a daily production increase of two cubic metres (from one to three) for marginal wells to qualify for the major workover incentive to repair casing.

“As a result of continuing high oil prices and the province’s competitive oil and gas fiscal regime, there is renewed interest in exploration opportunities in Manitoba,” said Smith. “These incentives will add to that continuing interest in our province.”

In 2003, the province experienced a doubling of exploratory drilling activity with 25 of the 94 wells drilled being exploratory. Last year, almost four million barrels of crude oil, valued at approximately $157 million, were produced. This generated about $6 million in revenue for the province. The petroleum industry employs about 350 people, primarily in southwest Manitoba.

Additional information about the Manitoba Drilling Incentive Program is available at http://www.gov.mb.ca/itm/petroleum or by calling the Petroleum Branch at 204‑945‑6577.

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