Imperial Oil, Canada’s largest and oldest oil company, has made it official: Calgary is indeed the industry’s capital.
In deciding to move its head office from Toronto, Imperial (owned 69.6 percent by ExxonMobil) became the last petroleum company of any size to make Calgary its home base, ending a low, slow drift to Western Canada over the past two decades by companies such as Suncor Energy, TransCanada and Shell Canada.
In the process, Imperial is giving a strong vote of confidence to two of Canada’s three energy frontiers — the Arctic and the Alberta oil sands — leaving a question mark hanging over the East Coast.
The universal response among analysts and observers was mostly one of surprise that Imperial had taken so long to join the industry clan in Calgary.
Alberta Premier Ralph Klein described the migration as “gratifying,” then delivered a mild rebuke: “They should have done it years ago.”
“While we have strategic assets located across Canada, many of our major initiatives are located in Western Canada and the North,” Imperial Chairman and Chief Executive Officer Tim Hearn said in a letter to the company’s 6,300 employees.
“This move will enable us to strengthen our focus on these key priorities.”
Company has extensive oil sands holdingsTopping that list are extensive holdings in the oil sands and heavy oil plays and a lead role in the Mackenzie Gas Project.
From its beginnings in 1880, when 16 southwestern Ontario refineries pooled their assets, Imperial made the landmark oil discovery at Leduc near Edmonton in 1947 that set in motion the modern-day Canadian industry and gave Imperial the springboard to its current position of strength, including 20 percent of Canada’s net proved reserves, with one of every seven barrels of oil being pumped from Imperial fields.
In 1970, it also notched Canada’s first Arctic oil find at Atkinson Point on the Beaufort Sea.
Like its peers in the fully integrated sector and the major U.S.-based companies with operations in Canada, Imperial has shifted its focus from the conventional light crude sector to the oil sands.
Through its Cold Lake operations in northeastern Alberta it has embarked on a multi-billion dollar development that should achieve output of 180,000 barrels per day by 2010.
In addition, it has a 25 percent stake in the Syncrude Canada consortium that could yield a net 140,000 bpd under current expansion plans.
Meanwhile, Imperial is putting the pieces together for a massive undertaking at its Kearl Lake property, 40 miles north of Fort McMurray.
In a joint venture with its sister company, ExxonMobil Canada, Imperial has indicated it will submit a regulatory application in 2005 for a possible C$8 billion venture that could produce 200,000 bpd over 70 years, starting in mid-2009.
Company also heads Mackenzie consortiumWhile weighing that mega-project, Imperial also heads up the Mackenzie consortium that is poised to file applications to open up Canada’s Arctic gas resources.
It controls about 3 trillion cubic feet of the proved 5.8 tcf of reserves held by the Mackenzie partners that are the basis of a proposed C$5 billion project.
As fast as the Arctic and oil sands are occupying Imperial’s horizon, the East Coast is fading.
The company owns 9 percent of the Sable gas field offshore Nova Scotia, where reserves and production are in decline, but is taking a time-out from exploration.
In mid-2003 it made a grand entry, with plans to sink a deepwater well, but only three months later Imperial and its partner Talisman Energy announced a dry hole.
Now Talisman Chief Executive Officer Jim Buckee has proclaimed a “wait and see” approach by the joint venture until someone else finds gas in the area.
That bleak outlook makes consolidation of Imperial’s corporate departments in Calgary even more logical, closing the geographical gap between the decision-makers and the key upstream activities.
Exactly how many will make the trek westward is not clear, although preliminary estimates put the number at 500 of the 1,500 in the Toronto office.