Drilling and production records are being set this year as Manitoba's oilpatch gears up for what is expected to be at least five years of growth.

The industry is expected to contribute half a billion dollars to the province's economy in 2006 and "we expect its share of the gross domestic product will continue to grow," says John Fox, acting assistant deputy minister for the province's mineral resources division.

By mid-October, about 400 new wells had been drilled, surpassing the previous record of 354 set in 1955.

Production is expected to hit 21,000 barrels per day, surpassing a production record set in 1969.

Production and drilling have almost doubled from 2005 levels, when 285 wells were drilled - and that was up from 119 in 2004. Production increased by 57 per cent in 2005 to 18,800 barrels per day.

Industry expenditures nearly doubled in 2005, to $243 million from $116.8 million in 2004, and are expected to do so again in 2006.

Higher commodity prices and discovery of a new field are responsible for the mini-boom, says Dave Pryce, vice-president of Western Canada operations for the Canadian Association of Petroleum Producers (CAPP).

Prices have flirted with $80 per barrel this year. In 2005, Manitoba oil fetched an average of $64.01 per barrel range, and the average is expected to be in the $69 range in 2006.

Manitoba's light crude commands top prices because it needs less processing than heavier oil.

And just when prices began to spike, the 7,200-hectare Sinclair field - located approximately 300 kilometres west of Winnipeg near the Saskatchewan border - came onstream.

"Almost half of the new wells drilled this year are in this region," says Pryce.

Although dwarfed by Alberta's industry (that province produced about two-thirds of Canada's 136.4 million cu. m of crude petroleum in 2005), Manitoba's growing oilpatch is expected to attract more industry notice.

"Manitoba has been relatively unexplored," says Pryce.

The boundaries of the Sinclair field have not been reached, agrees Fox.

Companies are continuing to step up production over the area, which encompasses four southwestern townships.

"The advantages are it's shallower drilling, the costs are lower, it's easier to access, close to existing highways and pipelines," says Fox.

The disadvantages include lower production rates for the average Manitoba well and smaller oil reserves than found in Saskatchewan or Alberta.

"The prize isn't as big, but the profitability can be equivalent," notes Fox, adding the field is not overcrowded. "There's lots of opportunities outside existing fields to make more discoveries."

Manufacturing is Manitoba's largest industrial sector, contributing about 13 per cent (more than $5 billion) to the province's $42-billion GDP.

However, the spurt in the petroleum industry contributed to a 2.7-per-cent increase in the GDP in 2005.

The province's production royalties were up 97 per cent to $13.6 million in 2005.

The industry also paid about $32 million in royalties to owners of surface and mineral rights.

To encourage even more development, the province has exempted sales tax for drilling and service rigs and equipment used for oil and gas exploration.

The Manitoba drilling incentive program, which runs to 2009, encourages higher-risk exploration for deeper oil pools, improved oil recovery projects and reworking of marginal wells.

(Sharon Adams can be reached at sharon@businessedge.ca)