Imperial Oil Ltd. is preparing contingency plans to transport its crude from Western Canada to refineries in Ontario should the Michigan government get its way and close down the Enbridge Inc. Line 5 pipeline under the Great Lakes.
Those plans include moving the oil in ships on the lakes, through other pipelines or via railcars.
The Enbridge pipeline carries oil from Western Canada through Great Lakes states to Ontario, where much of the crude is turned into gasoline and other fuels before the remainder is shipped via another pipeline to Quebec refineries. It’s a critical piece of infrastructure for numerous oil companies, including Imperial, which uses it to supply its Ontario refineries in Sarnia and Nanticoke.
Line 5 became the centre of a political battle after Michigan Governor Gretchen Whitmer announced she would revoke an easement granted in 1953 that allows the pipeline to cross the Straits of Mackinac – which connect Lake Michigan and Lake Huron – citing the risk of an oil spill.
The federal government and several provinces are pressing the United States to try and avoid the ordered May shutdown of the pipeline, with the Canadian Chamber of Commerce warning of significant disruption to fuel supplies to Canada’s two most populous provinces if Line 5 ceases operation this spring.
Imperial chief executive officer Brad Corson told an investor call Tuesday he thinks there is a “very low probability” that Line 5 will be shut down, but the company is keeping a close eye on developments south of the border.
He said Imperial is developing plans to transport crude to the refineries “through the seaway, as well as other pipelines and rail alternatives that are available.”
While Imperial is ensuring it has “adequate contingency plans in place,” Mr. Corson’s optimism about the future of Line 5 was bolstered Friday when Michigan’s environment department approved some of the permits needed for Enbridge to build a tunnel to house a replacement pipeline.
Oil pipeline opponents have been galvanized by new U.S. President Joe Biden revoking a key permit for the Keystone XL pipeline on his first day in office – a decision Mr. Corson called “very, very disappointing for the industry” and Canada as a whole.
“Fortunately for us, we do see enough other options that we don’t feel like this will cause us any constraints, but nonetheless we prefer to maximize flexibility,” he said.
Imperial reported a loss of $1.15-billion for its fourth-quarter Tuesday as it took a $1.17-billion non-cash charge on some natural gas assets it doesn’t think it will ever develop. It warned in December that it expected to take a hit of between $900-million and $1.2-billion on the assets.
Mr. Corson said the decision to put the assets on the backburner reflects Imperial’s plan to focus capital spending on high-return projects in its existing oil sands assets “and only the most attractive portions of our unconventional portfolio.”
The company’s total revenue and other income amounted to $6.03-billion in the fourth quarter, down from $8.12-billion a year earlier.
While Imperial also had its highest quarterly upstream production in 30 years, driven by record production at its Kearl oil sands facility in Alberta, Mr. Corson warned that the COVID-19 pandemic continues to hamper demand.
“We’re now seeing the impact of new community lockdowns in certain parts of Canada, particularly Ontario and Quebec. This continued uncertainty makes it difficult to forecast refinery utilization in the near term,” he said.
Calgary-based Imperial is 69.6-per-cent owned by U.S. energy giant ExxonMobil Corp., which Monday night announced it has created a division to commercialize its technology that helps reduce carbon emissions. Mr. Corson said Tuesday that Imperial will discuss over the coming months how its Canadian operations may fit into ExxonMobil’s goals.
In the meantime, he said, Imperial’s focus is on reducing the greenhouse gas intensity of its operations, including hitting its goal of a 10-per-cent reduction by 2023.
With a report from Reuters
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