The head of one of Canada's largest energy companies wants to see lower, more sustainable crude oil prices that would make better economic sense to both Alberta and the rest of Canada.

Tim Hearn, president and CEO of Imperial Oil Ltd., says he worries how oil prices above $60 per barrel will affect the long-term economic health of Alberta, particularly in regions such as Fort McMurray where the cost of doing business has skyrocketed in recent years.

"You have to recognize that there will be short-term deviations, but (looking at long-term price forecasts) we believe that if there's going to be that kind of energy growth in the world that it would be hard to see really, really depressed prices for any long period of time," Hearn said following a speech to the Calgary Chamber of Commerce last week.

"I'm not convinced or comfortable that the current prices that are in place today are sustainable and I'm not convinced they're healthy for both the province or our country. You know, there is a dark side to high prices and quite frankly I think we're seeing some of that today."

File photo by Jack Dagley, Business Edge
Imperial Oil Ltd. president and CEO Tim Hearn says his company remains committed to the Mackenzie Gas Project.

Hearn said oil and gas companies are as sensitive to higher prices as anyone else. He added he would like to see oil in the $30- to $40-per-barrel range, which in the long term better reflects the replacement costs from hydrocarbon sources in addition to "real" supply-demand fundamentals as opposed to current speculation largely based on geopolitical events.

"And the reason I feel that is that I think the global economy, and quite frankly a lot of companies that are in and outside the (energy) business, will be better off" with lower oil prices, he said. "I just think we'd all be better off - that's a personal view, not a forecast."

Citing Fort McMurray as a prime example, Hearn said the oil industry faces significant cost pressures in developing the oilsands given high labour and input costs.

Hearn was grilled by reporters on the fate of its Mackenzie Gas Project that has been stalled for months as project participants, First Nations communities and the federal government wrangle over the details. He reiterated his company's commitment - citing the $400 million that has been spent to date on the $7 billion venture to transport Mackenzie Delta gas from the Northwest Territories to markets south - and said he is hopeful regulatory hearings can begin in the coming months.

Commenting on royalty and tax arrangements being negotiated with the federal government, Hearn also said that the Mackenzie pipeline may not be economic depending on where prices go.

The Imperial CEO said that as liquid natural gas (LNG) projects proliferate to bring more gas from abroad to North America, there is no telling where prices will move.

"In the world there's over 65 years of proved natural gas resources. The world is not short of natural gas ... and I'll guarantee if LNG comes into North America you find $14 (per thousand cubic feet) gas.

"We're trying to find a framework because today, under current conditions, we don't have an economic project and we're working to make sure we can find one.”

Hearn did not elaborate on why the project is uneconomic at the moment.

Imperial relocated its corporate headquarters to Calgary from Toronto - a move that was officially completed late last month - and reports that 400 of the 500 employees made the move, swelling the company ranks in Calgary to 1,500.

"At the senior management level - executives and senior management - over 95 per cent of the people we asked came," Hearn said.

"Where we had some attrition was in our administrative ranks; we had a number of our employees that were right around retirement age ... they didn't come and we understood that."

(John Ludwick can be reached at ludwick@businessedge.ca)