Imperial unfazed by B.C.’s LNG tax plan
• Unlike some of its rivals, Imperial Oil Ltd. is not fazed by British Columbia’s tax proposal for natural gas exports, but has not finalized a site for its proposed liquefied natural gas project on the province’s west coast.
“I have read what’s come out, but the government has also said there are other dimensions to that fiscal regime. It’s a bit too early to judge it yet,” Imperial Oil’s CEO Rich Kruger said after a speech to business executives in Toronto.
Royal Dutch Shell PLC and BG Group PLC, which have also proposed liquefied natural gas export projects in B.C., have publicly fretted over the provincial government’s proposal to slap a 7% tax on exporters once they have recouped their capital costs.
Along with parent company Exxon Mobil Corp. Imperial filed an applica- tion with Canada’s National Energy Board last year to export up to 30 million tonnes of LNG per year for 25 years. But Mr. Kruger said the company will not be rushed to take a decision, even if it lags behind rivals or the perceived “window of opportunity” for Canadian LNG project closes.
“It is the quality of the project and obviously sooner is better than later, but if something is as big and capital intensive as LNG, we wouldn’t put a time frame to it.”
Imperial, which produces about 300,000 barrels of oil and gas per day, spent $8-billion last year in capital investments and plans to spend $40-billion this decade, but Mr. Kruger said that the industry faced “significant challenges to our licence to operate.”
While Canada has a balanced regulatory framework and world-class resources, “continued growth and investment should not be taken for granted,” said Mr. Kruger citing market access as a major challenge.
Imperial is a shipper on TransCanada Corp.’s proposed Keystone XL, Energy East pipelines and Kinder Morgan’s Trans Mountain project, but the company has also hedged its bet by investing in rail.
“While pipelines are the most efficient way to transport crude oil and petroleum products, other modes of transport such as rail will be needed. I refer to them primarily as kind of bridging agents until additional pipelines are in place and ultimately an insurance policy if pipelines don’t come about,” Mr. Kruger told the audience.
Imperial is building a 100,000-bpd rail terminal near Edmonton with partner Kinder Morgan Inc. at a cost of $270-million, expected to be ready either later this year or early 2015. The terminal could eventually be expanded to 250,000-bpd.
Despite rising interest in pipelines heading east, Imperial is not currently looking at expanding its remaining refineries in Sarnia and Nanticoke in Ontario. The company closed its smaller Dartmouth refinery in Nova Scotia last year.
“The North American [refinery] market demand tends to be flat to down, and any investment and expansion will be very selective.”