March 08, 2006

Total all-time records were set last year for oil well licensing and public offerings of Crown oil and gas rights and will be further supported by tax exemptions in Budget 2006, Industry, Economic Development and Mines Minister Jim Rondeau announced today.

Budget 2006, released yesterday by Finance Minister Greg Selinger, provides a retail sales tax exemption for drilling rigs and other equipment used for oil and gas exploration.

"Combined with the extension and enhancement of the Manitoba drilling incentive program, high oil prices, competitive royalty and production tax rates, and new discoveries have meant a significant increase in drilling activity in the province," said Rondeau. "Last year was a record year and with these supports 2006 is on track to be equally as successful. This will continue to benefit landowners, oil and gas rights owners and Manitobans."

Manitoba’s most recent public offering of Crown oil and gas rights on Feb. 15 generated $920,601.53 in revenue. The highest price per hectare was paid by Scott Land and Lease Ltd. for land located in the Kirkella area. The company paid $1,212.84 per hectare ($485.14 per acre) as a tender bonus.

The Crown oil and gas rights to 37 parcels of land were sold at an average price of $257.18 ($102.87 per acre), the highest average price per hectare of land sold at any public offering of Crown oil and gas rights since 1985. The land covered 3,475 hectares (8,687 acres) in southwestern Manitoba, the province’s principal region of oil and gas exploration and development.

Last year, a record 384 oil well licences were issued and 285 wells were drilled. There were nearly 1,900 producing oil wells in the province, generating approximately 4.7 million barrels of oil at an estimated gross value of $302 million. The industry spent approximately $190 million in Manitoba and provided direct employment for about 400 people. Much of the activity was concentrated in the Sinclair and Pierson fields in southwestern Manitoba. In 2004, 119 wells were drilled. So far this year, 78 wells have been drilled compared to 25 wells at this time in 2005.

Public offerings of Crown oil and gas rights in 2005 also included a record-high $6.13 million in total annual revenue collected. The highest price per hectare was $2,368.77 or $947.51 per acre and highest total area of land sold comprised 295 parcels covering 68,238 hectares or 170,595 acres.

If oil prices remain strong, it’s expected that increased drilling activity will continue throughout 2006. Early projections suggest between 250 and 300 new wells may be drilled this year. A total of 112,056 hectares or 280,140 acres of land are currently under lease in Manitoba, the most since 1997.

The province conducts public offerings of Crown oil and gas rights four times each year. Bidders apply under sealed tender to win the exclusive right to explore for and produce oil and gas from the lease area. This is the first of four sales scheduled for 2006. The next sale will be held on May 17.

More information about Manitoba’s offering of Crown oil and gas rights is available at http://www.gov.mb.ca/iedm/petroleum.

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