Imperial Oil Ltd., the Canadian subsidiary of Exxon Mobil Corp., isn’t joining the exodus of oil majors out of Canada.
But Canada’s longest-established oil company isn’t in a rush to expand either as it weighs whether to embark on a new phase of oilsands’ growth.
Chairman and CEO Rich Kruger said it needs the deposits, the “heavy hitters” of its Canadian portfolio, to be globally competitive in an environment of lower oil prices, which means the economic tests have “become more stringent than they might have been a few years ago,” he told reporters Friday after speaking to the company’s annual shareholders meeting in Calgary.
It’s a unique approach among Canada’s oilsands heavyweights to the sector’s restructuring over the last year, which has seen international companies retreat and Canadian operators expand.
But it’s another reminder that capital is mobile and that even deeply rooted companies like Imperial don’t have to accept the higher taxes and more regulation imposed by the Alberta and federal government, largely to meet international climate change commitments, if they are out of step with a world of opportunity.
“From a cost standpoint — whether it’s a carbon tax, whether its corporate income tax, municipal tax, revisions to royalties — we look at the cumulative effect and how it affects our competitiveness,” Kruger explained. “At the end of the day, it comes out of our pocket. What you call it doesn’t make much difference. It’s cash in and cash out.
“I do have concerns about the economic competitiveness of our resource base in Canada, in Alberta, and I think it’s really important that we not only look at ourselves, but how do we compare to other jurisdictions that are competing with us for investment.”
Canada has enjoyed more than its fair share of attention from the Exxon Mobil empire during the past couple of decades. Some would say it was regarded as its crown jewel.
A big push was made to build the Mackenzie pipeline, which would have monetized vast gas resources in the Arctic and was shelved because economic conditions changed following an absurdly long regulatory review.
Then there were years of aggressive spending in the oilsands to build the Kearl mining project and to expand the Cold Lake in-situ operation.
Those heavy investments are paying off with the recovery in oil prices. On Friday, Imperial posted a profit of $333 million for the first quarter, compared to a loss of $101 million in the same period a year ago. Production averaged 378,000 barrels of oil equivalent a day, down from 421,000 boe/d during the same period a year ago, due to a fire at the Syncrude facility in mid-March. Kearl contributed production of 129,000 b/d. Cold Lake contributed 158,000 b/d.
It’s really important that we not only look at ourselves, but how do we compare to other jurisdictions that are competing with us for investment
The company says it will increase its quarterly dividend in June by a penny to 16 cents per share
Most recently, Imperial has been getting ready the next tranche of projects, such as a further Cold Lake expansion and the Aspen project. Both would use technologies that would result in lower greenhouse gas emissions than existing projects.
“I think the jury is still out a bit on when” they could move forward,” Kruger said. They are still before regulators and “the real question is: When those approvals are in hand … (given the) economic quality and competitiveness of those projects in the business environment of the day, what do we see unfolding?”
Just as significantly, the company took a pass on oilsands acquisition opportunities nailed down by competitors Suncor Energy Inc., Canadian Natural Resources Ltd., and Cenovus Energy Inc.
For now, Kruger is spending more time talking to Canadian policy makers to ensure they are aware of the many advances being made and of the opportunities before them.
“As our industry has shown, we have an ability to make things better and better over time, so don’t bet against the Canadian oilsands. That is the overriding message,” he said. The question is whether governments are already too heavily invested in a transition to green energy to pay attention.