There’s a very good reason why Imperial Oil Ltd. is moving its corporate head office to Calgary from Toronto. But you won’t find it in the company’s press releases.
It’s called protecting your assets, especially those that are at risk. And in this case, the asset most at risk is the planned $5-billion Mackenzie Valley pipeline project.
Imperial leads a consortium of oil and gas producers out to build the 1,220-kilometre pipeline. But it’s hard to ride herd on a project as massive as this when you’re shuffling papers in an office tower in downtown Toronto.
T.O. may consider itself the centre of the universe, in Canada at least. In the land of oil and gas, however, Calgary is the country’s energy capital.
Imperial’s honchos must be close enough to corral the problems that are dogging the Mackenzie project, if the company wants to get this pipeline off the drawing board and into the Arctic tundra.
The outgoing chief executive of Imperial Oil predicted three months ago that the regulatory application for the Mackenzie project would be submitted by August.
But the proponents now will be lucky to get their application filed before the snow flies – in Calgary, that is, not in Yellowknife.
The project is also facing two lawsuits filed by the Deh Cho, an aboriginal group in the Northwest Territories through whose land 40 per cent of the pipeline will pass.
The way things are shaping up, this pipeline will only cross Deh Cho land if the federal government shifts out of park and accelerates settling the native group’s land claim.
Tim Hearn, Imperial’s president and chief executive, says of the move westward that having the company’s corporate offices in one location “will assist with overall organizational effectiveness.”
Indeed, if Ottawa proves unwilling to come to the table with the Deh Cho, Imperial will need to have its top guns in Calgary ready to catch a quick flight to the N.W.T. to grease the wheels of negotiation – or perhaps even to strike a side deal with the Deh Cho.
Imperial has other assets in the West, including its Syncrude oilsands partnership and Cold Lake heavy oil operation. But unlike the Mackenzie Valley project, these assets aren’t in jeopardy – certainly not as long as oil prices stay high.
Some analysts noted that Imperial’s decision to move 500 of its top managers and strategists to the Foothills City is a sign of energy-rich Alberta’s growing corporate and economic clout. That’s pretty obvious.
But this is a strategic move that goes beyond capitalizing on the oft-touted Alberta Advantage.
In fact, the Conference Board of Canada’s latest Metropolitan Outlook report predicts that Toronto, not Calgary, will be the fastest-growing urban economy in Canada this year and over the next four years.
Toronto’s economy is expected to grow by 5.3 per cent in 2004, compared with fourth-place Calgary (behind T.O., Regina and Edmonton) at 4.2 per cent. Toronto’s economy is also forecast to outpace Calgary’s from 2005 to 2008.
So let Alberta politicians crow that Calgary is gaining on Toronto in the contest about which city has the most head offices.
What this drive westward really signals is that Canada’s largest energy company isn’t about to let the Mackenzie Valley project slip away.
Unlike 30 years ago, this time the Arctic pipeline will be built – and Imperial will be in exactly the right place to ensure that it is.
Howling at His Shadow Premier Ralph Klein needs to go back and re-read the tale of the little boy who cried “Wolf!”
Maybe then he’d lay off with his constant warnings to the federal government about keeping its paws off Alberta’s oil and gas revenue.
Klein was hollering “Wolf! Wolf!” again last week during a luncheon talk to the Edmonton Petroleum Club. Yet even he acknowledges that he hasn’t heard anything, seen anything or smelled anything to suggest that Ottawa is stalking the province’s treasury.
Everyone from Prime Minister Paul Martin to Deputy PM Anne McLellan to Finance Minister Ralph Goodale has assured Albertans that the feds don’t plan to revisit the dreaded National Energy Program or anything like it.
So please, Ralph, give the bleating a rest. To borrow one of your phrases, shoot, shovel and shut up about this bogus bogeyman.
Otherwise, if a real wolf comes prowling, Albertans may just decide to ignore your cries.
Jack of La Mancha The federal government has wrapped up the sale of its remaining 19-per-cent stake in Petro-Canada Inc., despite NDP leader Jack Layton’s constant tilting at windmills.
Ottawa sold its 49.4 million Petrocan common shares at $64.50 Cdn each, raising nearly $3.2 billion.
Prime Minster Paul Martin’s minority government – acting more and more like it has a majority – completed the sale faster than bullriders at the Calgary Stampede hit the dirt.
The government pushed ahead despite bluster from Layton, who during the last election initially opposed selling off the federal Petrocan shares.
Now the NDP’s bantam rooster says he wants the Liberals to use most of the $3.2 billion on clean and renewable energy technologies, including hundreds of new wind turbines.
Layton and the NDP also intend to present a detailed plan to the Liberals this fall on how Canada can implement the Kyoto accord to reduce greenhouse gases.
Do you think the usually arrogant Liberals will listen this time around, now that they’ve been reduced to a minority government?
The answer is blowin’ in the wind. And it sounds like “No.”
In the Drill We Trust Jump on the income trust bandwagon or grow by hunting for and developing new oil and gas?
Those are the two strategies that junior to medium-sized energy firms must choose between trying to expand production and attract investors.
Midnight Oil & Gas Ltd. is going the income trust route. The Calgary-based junior’s shares rose more than 35 per cent last month after it announced a $350-million deal to acquire Vintage Petroleum Canada, the Canadian arm of Vintage Petroleum Inc. of Tulsa, Okla.
Midnight now plans to reorganize itself into an income trust and a spinoff natural gas producer.
The new trust, called Daylight Energy Trust, would own 95 per cent of the producing assets of Midnight and Vintage Canada – about 15,000 barrels of oil equivalent per day. The trust also would have about 188,000 hectares of undeveloped properties to draw from in maintaining production.
The spinoff exploration firm, Midnight Oil Exploration Co., would own about 750 barrels equivalent per day of production and have about 48,000 hectares of undeveloped land to explore.
Other medium-sized firms, such as Duvernay Oil Corp., Fairborne Energy Ltd. and Bow Valley Energy Ltd., are successfully growing through the drill bit, by aggressive exploration and development.
So if you’re an investor, where do you place your bets?
Start with learning more, at the Small Explorers and Producers Association’s (SEPAC) junior oil and gas investment symposium Oct. 19 at 1:15 p.m. at the Westin Hotel in Calgary. Eighteen member companies will present 15-minute summaries of their stories to analysts, brokers and investors at the free symposium. More information is available on SEPAC’s website – www.sepac.ca
(Mark Lowey can be reached at mark@businessedge.ca)
