Renewable diesel will pay off, says Imperial Oil

(Calgary) Imperial Oil expects “double-digit returns” from its $720 million investment to build what will be Canada’s largest renewable diesel facility at its Strathcona refinery, it said Tuesday. the oil giant.


The Calgary-based company announced plans last week to move forward with the project in suburban Edmonton, which was first announced in August 2021, is expected to produce 20,000 barrels per day of renewable diesel. when completed in 2025.

The project, which will use locally sourced vegetable oils and low-carbon hydrogen to produce biomass-based fuel, will help prepare Imperial for the energy transition by diversifying its oil portfolio, the company said. ‘business.

But executives told analysts on a conference call Tuesday about the company’s fourth quarter results that the project would also be a revenue stream in its own right.

“There is nothing about the fact that this is a renewable diesel project, or anything related to regulatory compliance, that suggests in any way that its rate of return will be lower to (that of) our portfolio,” said Imperial’s Vice President of Downstream Operations, Jon Wetmore.

“It’s very, very competitive, and it’s at the top of our portfolio. »

Imperial had indicated in March 2022 that it expected its proposed renewable diesel installation to cost around 500 million. Costs have since risen, partly due to inflationary pressures on labor and materials, but also because Imperial added rail logistics to the project.

Imperial President Brad Corson claimed that while this increased the total cost of the project, it would also allow Imperial to reach more markets.

“I can assure you it’s a very robust performance,” he said.

“It’s a return of over 10% and it competes very well with the other projects in our portfolio, which are competing for capital and therefore the reason why we made (this investment decision) . »

The comments come as Imperial celebrated fourth-quarter profit that more than doubled from a year earlier, helped by strong operational performance across its businesses.

Profits more than doubled

Imperial on Tuesday posted a quarterly profit of $1.73 billion, or $2.86 per share, which compared with earnings of $813 million, or $1.18 per share, for the fourth quarter of 2021.

Total revenue and other income for the three-month period reached 14.45 billion, down from 12.31 billion a year earlier.

Thanks to high commodity prices in 2022, Imperial made a full-year profit of $7.34 billion, the highest in the company’s history. It also generated record returns for shareholders, thanks to a 63% increase in its dividend and over $6 billion in share buybacks.

“We are closing the books on what has been the best year in company history, a stark contrast to the challenges we faced just two years ago, in the depths of COVID,” said said Mr. Corson.

Upstream production reached the equivalent of 441,000 barrels of oil per day in the fourth quarter, compared to 445,000 barrels per day for the same period in 2021. Production from refining activities reached in averaged 433,000 barrels per day in the most recent quarter, up from 416,000 barrels per day a year earlier.

Imperial also announced a company-wide goal on Tuesday to achieve carbon neutrality by 2050 for all of its operated assets, not just the oil sands.

The company explained that it wants to achieve this goal through “collaboration with government and other industry partners, successful technology development and deployment, and supportive tax and regulatory frameworks.”

As a member of the New Paths Alliance, a consortium of Canada’s largest oil sands companies, Imperial had already committed to reducing its greenhouse gas emissions from oil sands production to zero. by 2050.

The New Paths Alliance has proposed building a massive carbon capture and storage network in northern Alberta, which could see member companies invest $16.5 billion by 2030.

Mr. Corson explained that the Alliance could not make a final investment decision on this project until the federal government had committed a level of financial support that would put Canadian carbon capture projects on a on a par with those in the United States, where they enjoy government incentives in that country under their Inflation Reduction Act.

While the federal government has already announced an investment tax credit for carbon capture projects, the industry also wants to see continued financial support on the operations side.

However, Corson said the federal government and the Alberta provincial government understand the issues and are committed to seeing the proposal move forward.

“So I’m hopeful that if it’s not in the budget speech, it will come soon after, and we’ll get not just clarity, but resolution, and we can move forward on these projects,” estimated Mr. Corson.

Alberta’s oil and gas sector is the country’s biggest polluter, and while oil sands companies have managed to reduce their emissions per barrel, total oil sands emissions have more than doubled since 2005 due to pollution. increase in production.


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