A major southwestern Saskatchewan shallow-gas play, which is expected to produce 500 billion cubic feet (Bcf) of gas and increase provincial gas reserves by 20%, has driven recent provincial land sale totals to near record levels. In the sales' 50-year history, one in October 2002 ranked No. 8 in sales in Saskatchewan. Bidders spent C$18.6 million (of C$35.3 million in total bids) on development and exploratory acreage in and around the Upper Cretaceous Milk River gas play, which is being developed in the Abbey-Lacadena area approximately 50 miles northwest of Swift Current by Husky Energy and Profico Energy Management. Husky was the big spender at the sale, paying C$12.8 million for nearly 97,000 acres at C$132 per acre. That amount included a successful C$3.3-million bid for a 4,000-acre parcel at C$822 per acre. October's total in the Milk River play area was only slightly ahead of the C$18.5 million spent-primarily by Husky (C$9 million) and agent Rockwell Resources (C$7.8 million)-at the August 2002 sale. Per-acre prices were higher in August, with 97,000 acres sold at C$191 per acre, as compared with 231,000 acres sold in October at only C$80 an acre. With virtually all of the prospective land being locked up in the core areas, operators and brokers continued to snap up land in a widening swath to the east and north of Lacadena, and to the west as far as Bayhurst. Renaissance Energy made the initial Milk River discovery at Abbey in November 1999, and merged since then with Husky Energy. Clayton Woitas, former president of Renaissance, formed Profico, the other major player at Abbey-Lacadena, shortly after the merger. The first major land acquisition in the play was Renaissance's April 2000 purchase of 74.5 sections (48,000 acres) for C$1.5 million, or C$32 per acre. Provincial sales during February, April and June 2002 attracted significant bonuses and per-hectare prices leading up to the large August and October sales. More than 300 exploratory and development wells have been drilled on the play to date. With the Saskatchewan government's October 2002 announcement of royalty reductions for wells drilled after that date, a flurry of new drilling is expected this year. Currently, there are 180 active or licensed Milk River locations in the prospect area. Initial production, which has been constricted by infrastructure, began to come onstream following the government announcement. Husky, which expects to add 250 Bcf of proven gas reserves, anticipated sales of 16- to 20 million cubic feet per day in December 2002.
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