July 17, 2006
VIRDEN—The oil industry will see increased production and investment as well as reduced greenhouse gas emissions under an Enhanced Oil Recovery strategy launched today to boost the province’s booming oil industry, Premier Gary Doer announced here.
"The province’s oil fields have been producing record-breaking results in recent years and our fields remain largely unexplored," said Doer. "When combined with a renewed interest in our oil and gas prospects, this strategy will strengthen the province’s competitive oil and gas regime that is continuing to generate spectacular results for industry and Manitobans."
The province has taken several steps to encourage the growth of the oil industry in Manitoba. Major changes to the Manitoba Drilling Incentive Program in 2001 were introduced to encourage higher-risk exploration for deeper oil pools, investment in improved oil-recovery projects and the reworking of marginal wells.
Legislation was changed in 2005 to strengthen environmental protection, streamline administration, enhance enforcement and encourage exploration. The province’s support of the oil industry continued in Budget 2006 where the retail sales tax was exempt for drilling and service rigs and other equipment used for oil and gas exploration.
Drilling activity has soared to its highest level in 20 years. So far this year, 207 wells have been drilled and 192 licences issued compared to 66 wells and 120 licences for the same period last year. Much of this activity has been concentrated in the Sinclair and Pierson fields.
The strategy will promote investment and increase oil production by encouraging the use of produced salt water or gas-injection processes in recovering oil. Enhanced oil recovery is a way of producing additional crude oil from wells that are in the mature stage of their commercially productive life. Injection of these substances increases the pressure of the oil pool, which allows producers to pump more oil to the surface.
The province will evaluate the feasibility of introducing carbon dioxide-based recovery. The study will examine potential sources of CO2 production and methods of transporting the gas to oil fields. The province will also look for changes to Manitoba’s oil and gas regulations to promote greater private-sector investment in CO2 enhanced oil recovery projects. The province will also introduce amendments to the Manitoba Drilling Incentive Program including the removal of production restrictions on wells that are being converted to injection.
When injection wells are first drilled, companies are allowed to extract a volume of oil which is exempt from royalties and production taxes. Under the proposed changes, these unused oil volumes on converted wells may be moved to a company account for later use or to be used to extend the term of the injection well incentive to a maximum of 18 months from 12 months.
Injection of CO2 for enhanced oil recovery will not only increase oil production but will also reduce Manitoba's CO2 emissions through storage of CO2 in oil reservoirs that would otherwise be released into the atmosphere. A CO2 market can be developed in Manitoba to take advantage of opportunities to increase oil recovery and reduce net CO2 emissions.
"These changes will help us balance increased oil recovery with our need to meet greenhouse gas reduction goals," said Doer. "This strategy will demonstrate we can pursue increased energy production without increasing the environmental risk."
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BACKGROUND INFORMATION
MANITOBA’S OIL INDUSTRY
Highlights of the 2005 oil industry activity include:
Manitoba’s oil industry contributed more than $243 million to the provincial economy last year and paid $13.6 million to the province in royalties production taxes and for Crown oil and gas rights.
The Manitoba average crude oil price for 2005 rose 31 per cent to $64.01 per barrel.
The value of provincial oil production reached a record $324 million.
Oil industry expenditures increased for the sixth straight year to $243 million:
- industry spent $176 million on exploration, development and production;
- provincial government revenues from royalties, production tax and Crown oil and gas rights totalled $13.6 million;
- landowners received $7.7 million in surface rentals and bonuses;
- mineral holders received $26.9 million in royalties; and
- industry paid property taxes of $2 million.
The drilling success rate was 97 per cent.
Tundra Oil and Gas Ltd., Rideau Petroleums Ltd. and EOG Resources Canada were the province’s top drillers in 2005.
In December 2005, provincial crude oil production topped 18,800 barrels per day, a year-over-year increase of 57 per cent.
Manitoba has more than 1,900 active wells.
Since 1999, the Manitoba government has introduced several initiatives to support the oil and gas industry including:
Budget 2006 provided for a retail sales tax exemption for drilling and service rigs and other equipment used for oil and gas exploration;
major changes to the Manitoba Drilling Incentive Program in 2001 to encourage higher risk exploration for deeper oil pools, investment in improved oil recovery projects and the reworking of marginal wells;
a five-year extension of the Manitoba Drilling Incentive Program until Jan. 1, 2009, and program improvements to encourage companies to pursue oil and gas investment opportunities in Manitoba, and;
introduction of changes to legislation to strengthen environmental protection, streamline administration, enhance enforcement and encourage exploration.
The Oil Activity Review is available at
http://www.gov.mb.ca/iedm/petroleum.RETURN