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

CALGARY –

Imperial Oil Ltd. expects “double-digit returns” from its $720-million funding to construct what will probably be Canada’s largest renewable diesel manufacturing facility at its Strathcona refinery, the oil big stated Tuesday.

The Calgary-based firm introduced final week its plans to go forward with the mission on the outskirts of Edmonton that was first introduced in August 2021, is predicted to supply 20,000 barrels per day of renewable diesel as soon as full in 2025.

The mission, which is able to use domestically sourced vegetable oils and low-carbon hydrogen to supply a biomass-based gas, will assist to set Imperial up for the power transition by diversifying its petroleum-based portfolio, based on the corporate.

But executives instructed analysts on the corporate’s fourth-quarter earnings name Tuesday that the mission may even be a money-maker in its personal proper.

“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,” stated 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 anticipated its proposed renewable diesel facility to value roughly $500 million. Costs have risen since then, partly resulting from inflationary pressures on labour and supplies, but in addition as a result of Imperial added rail logistics to the mission’s scope.

Imperial’s chairman Brad Corson stated whereas that did enhance the mission’s complete value, it can additionally allow Imperial to succeed in extra markets.

“I can assure you, it’s a very robust return,” he stated.

“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 feedback come as Imperial celebrated a fourth-quarter revenue that greater than doubled in contrast with a yr earlier, helped by a robust working efficiency throughout all of its business.

The firm stated 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 yr earlier.

Total income and different earnings for the three-month interval amounted to $14.45 billion, up from $12.31 billion within the fourth quarter of 2021.

Thanks to sturdy commodity costs in 2022, Imperial reported full-year earnings of $7.34 billion, the best within the firm’s historical past. It additionally delivered report shareholder returns, pushed by a 63 per cent enhance to its dividend and greater 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 stated.

Imperial’s upstream manufacturing within the fourth quarter averaged 441,000 gross oil-equivalent barrels per day, in contrast with 445,000 in the identical interval of 2021. Refinery throughput averaged 433,000 barrels per day for the quarter, up from 416,000 barrels per day a yr earlier.

Imperial additionally introduced Tuesday a companywide purpose to realize net-zero greenhouse emissions by 2050 throughout all of its operated belongings, not simply oilsands.

The firm stated it goals to realize this by “collaboration with government and other industry partners, successful technology development and deployment and supportive fiscal and regulatory frameworks.”

As a part of the Pathways Alliance, a consortium of Canada’s largest oilsands corporations, Imperial had already ledged to cut back its greenhouse gasoline emissions from oilsands manufacturing to net-zero by 2050.

The Pathways group has proposed constructing a large carbon seize and storage community in northern Alberta, that would see member corporations make investments $16.5 billion earlier than 2030.

Corson stated Pathways cannot make a closing funding choice on that mission till the federal authorities commits to a stage of monetary help that may put Canadian carbon seize initiatives on equal footing with these within the U.S., the place they profit from authorities incentives in that nation’s Inflation Reduction Act.

While the federal authorities has already introduced an funding tax credit score for carbon seize initiatives, the trade additionally needs to see ongoing monetary help on the working facet.

However, Corson stated each the federal authorities and the Alberta provincial authorities perceive the problems, and are dedicated to seeing the proposed mission go forward.

“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 stated.

Alberta’s oil and gasoline sector is the nation’s largest polluter, and whereas oilsands corporations have managed to cut back their emissions per barrel, complete emissions from the oilsands have greater than doubled since 2005 resulting from elevated manufacturing.

This report by The Canadian Press was first printed Jan. 31, 2023.