INVESTMENT IN OILSANDS IS KEY, IMPERIAL CEO SAYS
‘I do have concerns about the economic competitiveness of our resource base’
Imperial Oil CEO Rich Kruger isn’t saying whether his company is a buyer in the Great Oilsands Sale of 2017, but there is one topic he’s eager to talk about. Competitiveness.
At the company’s annual meeting Friday, the head of the integrated petroleum producer repeatedly mentioned the need to examine the overall competitiveness of the Canadian oilpatch to attract capital and build for the future.
Low oil prices and uncertainty surrounding government regulations have “put a great deal of pressure on our global competitiveness, the ability for us to compete, to continue to invest,” he told the audience at Imperial’s headquarters.
In other words, governments should look at all of the costs and expenses facing the energy sector, from rising municipal, provincial and federal taxes — which hit $3 billion combined in 2015 — to a national price on carbon.
In case the message wasn’t clear, Kruger hammered the point home several more times speaking with reporters.
“Our belief (is) that the oilsands will be part of that future, but we can’t take it for granted; investments must compete globally,” he said. “I do have concerns about the economic competitiveness of our resource base in Canada, in Alberta.”
Kruger isn’t the only oilpatch leader talking about the matter.
Several executives discussed similar concerns with Premier Rachel Notley and Energy Minister Marg McCuaig-Boyd during meetings earlier this year.
But Imperial, which is majority owned by ExxonMobil Corp., is in the midst of moving two future oilsands projects through the regulatory process.
If approved, these developments would provide muchneeded growth for the sector once the current suite of construction projects wraps up, particularly as the province projects capital investment in the oilsands will dip by 35 per cent between 2015 and next year.
Imperial is awaiting regulatory approval of its proposed Cold Lake expansion, a thermal project that would produce 50,000 barrels of oil per day, as well as its Aspen development, which has two phases of 75,000 bpd each, before the company makes a final investment decision.
Both are multibillion-dollar projects, using solvents and other technology to lower greenhouse-gas emissions and improve efficiency.
Imperial is focusing on its next instalment of growth, completing technical and commercial work so it will have several options available.
Kruger said the “jury is still out a little bit” on when Canada will see the next wave of oilsands growth, but noted technology and innovation will play a factor in making the resource more competitive, both economically and environmentally.
“Don’t bet against the Canadian oilsands. That’s the overriding message.”
The competitiveness issue resurfaces in the midst of a consolidation phase rolling through the sector.
Several international players — including Royal Dutch Shell and Statoil — have sold their oilsands assets, while Canadian producers such as Cenovus Energy and Canadian Natural Resources have collectively spent more than $31 billion as buyers since December.
South of the border, the Trump administration is cutting environmental regulations and slashing taxes to attract more investment to the United States.
Gary Leach, of the Explorers and Producers Association of Canada, said the exodus of global majors from Alberta’s oilsands is a signal companies with options are leaving for places offering better returns on their capital.
“The U.S. remains Canada’s largest customer, but also our largest competitor and is making changes to encourage business growth; lowering corporate income tax is one example,” added Chelsie Klassen of the Canadian Association of Petroleum Producers.
Provincial officials insist they aren’t concerned about the selloff.
They are quick to note Alberta successfully pushed the federal government to approve new pipelines that should unlock higher prices for producers.
As well, the province introduced a new royalty regime this year that will lower industry costs and improve competitiveness, said McCuaig-Boyd.
But the minister has invited industry groups to identify “pressure points” that are holding up the sector, and said she wants to see a list of their priorities.
“We are doing a lot of things with an eye on competitiveness,” McCuaig-Boyd said in an interview.
Experts believe the takeover binge in the oilsands isn’t over, with rumours other international players, including Chevron and Total SA, might be potential sellers in the months ahead.
Suncor Energy CEO Steve Williams said Thursday his company would consider acquisitions and he doesn’t believe the departure of large international players is “quite finished yet.”
As for Imperial, Kruger noted the company has internal growth opportunities, but he also vowed to “keep our eyes on the horizon ...”
“I go to the mall here, and there are lot of For Sale signs. Because there is a For Sale sign doesn’t mean I go in and buy. It needs to be consistent with things we think we can take in and add uniquely more value than the competition.”
In a world with low commodity prices and the U.S. slashing taxes, talk about improving competitiveness is a mantra again for the Canadian oilpatch.
The rush out of the oilsands has given the issue more urgency.