Imperial Oil expects 'double-digit' returns from renewable diesel facility
Imperial Oil Ltd. expects “double-digit returns” from its $720-million investment to build what will be Canada's largest renewable diesel manufacturing facility at its Strathcona refinery, the oil giant said Tuesday.
The Calgary-based company announced last week its plans to go ahead with the project on the outskirts of Edmonton that was first announced in August 2021, is expected to produce 20,000 barrels per day of renewable diesel once complete in 2025.
The project, which will use locally sourced vegetable oils and low-carbon hydrogen to produce a biomass-based fuel, will help to set Imperial up for the energy transition by diversifying its petroleum-based portfolio, according to the company.
But executives told analysts on the company's fourth-quarter earnings call Tuesday that the project will also be a money-maker in its own right.
“There's nothing about the fact that it's a renewable diesel project, or driven by regulatory compliance, that in any way suggests that its rate of return is below our portfolio,” said Jon Wetmore, Imperial's vice-president for downstream.
“It's very, very competitive and at the top of our portfolio.”
Imperial had indicated in March 2022 that it expected its proposed renewable diesel facility to cost approximately $500 million. Costs have risen since then, in part due to inflationary pressures on labour and materials, but also because Imperial added rail logistics to the project's scope.
Imperial's chairman Brad Corson said while that did increase the project's total cost, it will also enable Imperial to reach more markets.
“I can assure you, it's a very robust return,” he said.
“It's a double-digit return and it competes very well with other projects in our portfolio that are competing for capital and hence, the reason we took it to (a final investment decision).”
The comments come as Imperial celebrated a fourth-quarter profit that more than doubled compared with a year earlier, helped by a strong operating performance across all of its business.
The company said it earned $1.73 billion or $2.86 per diluted share for the quarter, up from $813 million or $1.18 per diluted share a year earlier.
Total revenue and other income for the three-month period amounted to $14.45 billion, up from $12.31 billion in the fourth quarter of 2021.
Thanks to strong commodity prices in 2022, Imperial reported full-year earnings of $7.34 billion, the highest in the company's history. It also delivered record shareholder returns, driven by a 63 per cent increase to its dividend and more than $6 billion in share buybacks.
“We are closing the books on what was the best year in the company's history, a stark contrast to the challenges we faced just two years ago at the depths of COVID,” Corson said.
Imperial's upstream production in the fourth quarter averaged 441,000 gross oil-equivalent barrels per day, compared with 445,000 in the same period of 2021. Refinery throughput averaged 433,000 barrels per day for the quarter, up from 416,000 barrels per day a year earlier.
Imperial also announced Tuesday a companywide goal to achieve net-zero greenhouse emissions by 2050 across all of its operated assets, not just oilsands.
The company said it aims to achieve this through “collaboration with government and other industry partners, successful technology development and deployment and supportive fiscal and regulatory frameworks.”
As part of the Pathways Alliance, a consortium of Canada's largest oilsands companies, Imperial had already ledged to reduce its greenhouse gas emissions from oilsands production to net-zero by 2050.
The Pathways group has proposed building a massive carbon capture and storage network in northern Alberta, that could see member companies invest $16.5 billion before 2030.
Corson said Pathways can't make a final investment decision on that project until the federal government commits to a level of financial support that would put Canadian carbon capture projects on equal footing with those in the U.S., where they benefit from government incentives in that country's Inflation Reduction Act.
While the federal government has already announced an investment tax credit for carbon capture projects, the industry also wants to see ongoing financial support on the operating side.
However, Corson said both the federal government and the Alberta provincial government understand the issues, and are committed to seeing the proposed project go ahead.
“So I'm optimistic that if it's not in the budget speech, it will be soon thereafter that we will get not just clarity, but resolution - so we can move forward on these projects,” Corson said.
Alberta's oil and gas sector is the country's largest polluter, and while oilsands companies have managed to reduce their emissions per barrel, total emissions from the oilsands have more than doubled since 2005 due to increased production.
This report by The Canadian Press was first published Jan. 31, 2023.
CTVNews.ca Top Stories
Ottawa public school board, 3 Toronto-area school boards launch lawsuit against social media giants
The Ottawa-Carleton District School Board and three school boards in the Toronto-area have launched legal action against social media giants, accusing them of "disrupting students' fundamental right to education."
Several flight attendants from Pakistan have gone missing after landing in Canada
Multiple flight attendants from Pakistan International Airlines have abandoned their jobs and are believed to have sought asylum in Canada in the past year and a half, a spokesperson for the government-owned airline says.
Statistics Canada reports real GDP up 0.6% in January as Quebec strikes end
Statistics Canada says real gross domestic product grew 0.6 per cent in January, helped by the end of public sector strikes in Quebec in November and December.
Tipping is off the table at this Toronto restaurant
A Toronto restaurant introduced a surprising new rule that reduced the cost of a meal and raised the salaries of staff.
Rainfall warnings of up to 90 mm among weather alerts in effect for 7 provinces
Rainfall warnings of up to 90 millimetres, air quality advisories and other alerts have been issued for seven Canadian provinces, according to the latest forecasts.
King Charles calls for acts of friendship in first public remarks since Kate's cancer diagnosis
King Charles III gave public remarks for Maundy Thursday, addressing the importance of acts of friendship, following his and Catherine, Princess of Wales’ cancer diagnoses.
Ukrainian child asylum seekers in St. John’s get class of their own
Roughly 50 children will gathered in a St. John’s classroom for the first time on Saturday for unique lessons on Ukrainian language, culture and history.
A Nigerian woman reviewed some tomato puree online. Now she faces jail
A Nigerian woman who wrote an online review of a can of tomato puree is facing imprisonment after its manufacturer accused her of making a “malicious allegation” that damaged its business.
Donald Trump assails judge and his daughter after gag order in N.Y. hush-money criminal case
Donald Trump lashed out Wednesday at the New York judge who put him under a gag order that bars him from commenting publicly about witnesses, prosecutors, court staff and jurors in his upcoming hush-money criminal trial.