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Imperial Oil expects ‘double-digit’ returns from renewable diesel facility

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CALGARY — Imperial Oil expects “double-digit returns” from its $720 million investment to build Canada’s largest renewable diesel production facility at its Strathcona refinery, the oil giant said Tuesday. Stated.

The Calgary-based company last week announced plans to move ahead with a project outside of Edmonton, first announced in August 2021, that will produce 20,000 barrels of renewable diesel per day when completed in 2025. intend to do something.

The project, which uses locally sourced vegetable oils and low-carbon hydrogen to produce biomass-based fuels, will help prepare Imperial for the energy transition by diversifying its oil-based portfolio, according to the company. increase.

But management told analysts during the company’s fourth-quarter earnings call on Tuesday that the project would be profitable on its own.

“The fact that it’s a renewable diesel project, or that it’s driven by regulatory compliance, doesn’t mean that the rate of return will be lower than our portfolio,” said John Wetmore, Imperial’s vice president of downstream operations. Nothing to suggest.

“Very competitive and top of the portfolio.”

Imperial indicated in March 2022 that it expected the proposed renewable diesel facility to cost about $500 million. Since then, costs have risen, partly because of inflationary pressures on labor and materials, but also because Imperial added rail logistics to the scope of the project.

Imperial Chairman Brad Corson said this would increase the overall cost of the project, but would allow Imperial to reach more markets.

“I can guarantee you a very strong return,” he said.

“It’s a double-digit return and it competes very well with other projects in our portfolio competing for capital, which is why[we made the final investment decision].”

The comment celebrates Imperial’s fourth quarter earnings more than doubling year-over-year, underpinned by strong performance across all businesses.

The company reported earnings of $1.73 billion, or $2.86 per diluted share, for the quarter, up from $813 million, or $1.18 per diluted share, in the year-ago quarter.

Total and other income for the three months was $14.45 billion, up from $12.31 billion in Q4 2021.

Imperial reported a full-year profit of $7.34 billion on higher commodity prices in 2022. This is the best in the company’s history. It also delivered record shareholder returns thanks to his 63% increase in dividends and his more than $6 billion share buyback.

“We are closing the books on what has been one of the best years in the company’s history, which is in stark contrast to the challenges we faced just two years ago during the COVID nadir,” Corson said. .

Imperial’s upstream production averaged 441,000 gross oil equivalent barrels per day in the fourth quarter, compared to 445,000 barrels in the same period in 2021. Refinery throughput averaged 433,000 barrels per day for the quarter, up from 416,000 barrels per day in the same period last year.

Imperial also announced Tuesday its company-wide goal of achieving net zero greenhouse gas emissions by 2050, not just in the oil sands, but across all assets under management.

The company said it aims to achieve this through “collaboration with governments and other industry partners, successful technology development and deployment, and supportive financial and regulatory frameworks.”

As part of the Pathways Alliance, Canada’s largest consortium of oil sands companies, Imperial had already aimed to reduce greenhouse gas emissions from oil sands production to net zero by 2050.

Pathways Group is proposing to build a large-scale carbon capture and storage network in northern Alberta, which could allow member companies to invest $16.5 billion by 2030.

Corson said Pathways cannot make a final investment decision on the Canadian carbon capture project until the federal government commits to a level of financial support that puts it on par with U.S. projects. Inflation control law.

The federal government has already announced investment tax credits for carbon capture projects, but the industry also wants continued operational financial support.

Corson said, however, that both the federal and Alberta governments understand the problem and are committed to moving forward with the proposed project.

“So I’m optimistic. If it’s not in the budget speech, we’ll have not only clarity but a solution soon afterwards, so we can move these projects forward,” Corson said. said.

Alberta’s oil and gas sector is the country’s largest source of pollution, and while oil sands companies have succeeded in reducing emissions per barrel, total emissions from the oil sands have fallen by 2005 due to increased production. It has more than doubled since then.

This report by the Canadian Press was first published on January 31, 2023.

Company in this story: (TSX:IMO)

Amanda Stevenson, Canadian Press

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