Imperial Oil unsure about growth plan

Gary Park

For Petroleum News

Imperial Oil’s target of doubling its Canadian production to about 570,000 barrels per day by 2020 could shrink unless there is a quick solution to pipeline bottlenecks, said the company’s new Chief Executive Officer Richard Kruger.

While confident that TransCanada’s Keystone XL will get approval from the Obama administration and that proposed pipelines from Western Canada to eastern refineries will go ahead, Imperial is ready to consider its “contingencies” if the pathway to crude exports is not cleared, he told reporters at Imperial’s annual meeting.

“We will look at additional rail options and we will sync up our export capacity with our growth plans,” he said.

Kruger said pipeline arrangements are already in place for first crude from Imperial’s initial output of 110,000 bpd from its much-delayed Kearl oil sands operation, which he insisted is poised to start up any day now at a cost of C$12.9 billion, up C$2 billion from earlier estimates.

But the company needs more pipeline space to expand Kearl and introduce other projects.

Although open to the use of rail because of its ability to quickly take new oil, Imperial viewed pipelines as the best, safest and least costly method.

Imperial said the imminent flood of new bitumen could impact prices that have been dragged down due to increasing supplies from Western Canada and restricted pipeline capacity.

The company said lower realized oil prices contributed to a 21 percent drop in its first quarter profit to C$798 million from C$1.01 billion a year earlier from output that averaged 284,000 bpd, with 164,000 bpd coming from its long-established Cold Lake heavy oil operation in Alberta.

If Imperial is to double those volumes, the bulk will come from a tripling of Kearl and more expansion phases at Cold Lake, Kruger said.

He said Imperial’s bitumen has a competitive edge because it costs less to produce and has access to ExxonMobil’s network of refineries, along with using a paraffinic froth treatment process to eliminate water, fine particles and the heaviest hydrocarbons from the oil sands.