By Lauren Krugel
CALGARY – Imperial Oil is open to working with other players in British Columbia’s burgeoning liquefied natural gas scene if it leads to a better project, CEO Rich Kruger said Thursday.
“We look to manage risks. We look to ensure we have the most profitable projects we can,” Kruger told reporters following an investor conference.
“And if that could include sharing infrastructure, sharing logistics, economies of scale on plants, we’ll look at all of those levers that can make a project most attractive to us, while managing the risk we have.”
Imperial’s (TSX:IMO) LNG ambitions — which are being pursued alongside U.S. parent, ExxonMobil (NYSE:XOM) — are in their very early stages.
Kruger said he can’t speculate on what other companies may or may not do.
“But we’re going to look at what can make our project the most attractive and the most valuable, and if that includes co-operating with others in some form or fashion in any part of the value chain, we’ll look at it seriously.”
Together, Imperial and Exxon have a large acreage position in northeastern B.C.’s gas-rich Horn River Basin, recently augmented by the $3.1-billion acquisition of Celtic Exploration, which had shale gas holdings in the Montney formation in B.C. and the Duvernay formation in Alberta.
The Canadian and U.S. companies also recently made an expression of interest in B.C. Crown land at Grassy Point, north of Prince Rupert, as a potential site for an LNG terminal, though it’s just one option being explored. Others looking at that location include Nexen, owned by Chinese firm CNOOC Ltd., Australia’s Woodside and Korea’s SK E&S.
There are scores of proposals on the drawing board to chill northeast B.C. natural gas into a liquid state, enabling the resource to be shipped to lucrative Asian markets by tanker. Multibillion-dollar projects led by Shell, Chevron and Malaysia’s Petronas are just a few that are currently on the go.
Although many other projects are forging ahead, Kruger said he’s not concerned that the window of opportunity to get in on the LNG opportunity will eventually close on Imperial and Exxon.
“When you’re advancing something like an LNG project with its significant cost and all, we certainly pay attention to what others are doing, but our own progress and plans aren’t driven by what others may be doing,” he said.
Besides, he later added, “I think it’s a safe assumption to say they won’t all come to fruition.”
Also Thursday, Imperial said the first phase of the newly-opened Kearl oilsands mine is producing about 40,000 barrels of oil per day and is expected to ramp up to its full capacity of 110,000 barrels per day over the summer.
Earlier this year, Imperial said the first phase of will cost $12.9 billion, up from a previous estimate of $10.9 billion, due to challenges in transporting massive pieces of equipment from South Korea to the mine site north of Fort McMurray.
Imperial faced opposition in Idaho and Montana to its plan to ship the huge loads along secondary highways. In the end, it ended up breaking the modules into pieces, trucking them up to Canada along Interstate highways, and then putting them back together.
Startup had been targeted for late 2012 or early 2013, but harsh winter weather also slowed the process. The project started up in late April.
A second phase of Kearl is about one third complete, and is expected to start up in 2015, said Glenn Scott, senior vice-president of Imperial’s resources division.
So far the expansion is tracking on schedule and on budget, he said.
For the second phase, the equipment will be assembled at a module yard in Edmonton — where the pieces of for the first phase were reassembled.
“We believe they’re now qualified and capable to build all the Kearl large-sized modules and that helps us avoid any threat of transportation-related delays or costs with the Kearl expansion project,” said Scott.
Imperial changed CEOs earlier this year as part of a broader corporate reshuffle at its parent company.
Bruce March left Imperial to run ExxonMobil’s global chemical operations after nearly five years in the role. Kruger had been president of ExxonMobil Production Co.