Manitoba's oil industry heats up

Manitoba is the poor cousin among the Prairie provinces when it comes to oil, but its small industry is growing rapidly, thanks to high world prices, relatively easy-to-access reserves and government incentives.

Statistics released by the Manitoba government show a sharp rise in exploration and production. There were 3,300 wells in the province last year that produced a total of 29,000 barrels a day that compares with 11,020 barrels per day produced in 2004.

There were also record numbers of wells being licensed and drilled 632 and 516 respectively, nearly double the 2009 numbers.

The numbers pale in comparison with Saskatchewan and Alberta. Alberta alone produces some two million barrels a day. But Manitoba is encouraged that its small slice of the oil industry, concentrated in the rural southwest corner of the province, is growing.

"It means employment in parts of Manitoba where industry hasn't been before," Dave Chomiak, the province's minister of innovation, energy and mining, said Thursday.

"The companies have told me, and the stats show, that they're not only drilling more this year, they're drilling more next year and their plans call for significant continued drilling."

Manitoba's oil industry was almost non-existent a decade ago, but high world prices and discoveries of light sweet crude have spurred development.

Incentive program to continue

"The largest driver of this is the commodity price of oil," said Travis Davies, spokesman for the Canadian Association of Petroleum Producers. "People are attracted to a conventional play where you can get at this high quality oil at a rate that is very favourable to commodity price."

The province has also put up a series of incentives to attract more development. New wells are given holidays on royalties and taxes. Deep wells are given even longer royalty-free periods. Other benefits are offered to wells converted to water-injection.

The government recently announced that its incentive program will be extended until 2014.

The incentives are welcome, Davies said, but are not the driving force behind the mini-boom in Manitoba's oil field.

"It's a very conventional play. If you look at some of the much deeper stuff involving new technologies in places like Alberta and Saskatchewan, (incentives) get even more important ... because you're looking at deploying more capital to get at that resource."