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Financial Post: Oilsands advice

‘My message to policy-makers is: Look at the past, what failed and what provided what you wanted’


Calgary Bureau Chief
Financial Post [email protected]

Alberta policy-makers need to be careful about making changes that could frustrate new oilsands development, the chief executive of Exxon Mobil Corp. warned yesterday.

As Alberta nears completion of a public review on whether royalties for oilsands projects are adequate, Rex Tillerson said Canada has the benefit of hindsight of both failed and successful energy policies.

“My message to policy-makers is: Look at the past, what failed and what provided what you wanted for the development of the oilsands,” he told reporters after speaking about the challenges of energy security to the Spruce Meadows Round Table, a prestigious annual gathering of international business executives.

“If you are unhappy with the way the pie is being shared today, we will talk about it. But you have to be careful about dealing with ongoing projects, as opposed to stimulate new development, because all of that risk is still up in front.”

The Alberta government is expected to make public in days the results of an extensive review of the royalties it collects from oilsands and conventional oil and gas projects, following public pressure to investigate whether taxpayers are getting a big enough share from the province’s energy riches.

Another major risk to the projects is oil prices, and “none of us knows what oil prices are going to be,” Mr. Tillerson said. “Nobody told me in 1998 when oil dropped to US$10 a barrel what can we do to help you out.”

He told the audience today’s US$70-a-barrel oil price is unjustified by fundamentals. “I cannot explain why we have US$70 oil today,” he said. “We are not having trouble finding oil. There is something else going on that I don’t get.”

Exxon Mobil produces 2.5 million barrels of oil a day, and processes six million in its refineries.

He said a lot of energy policy in the world today is written in a high-oil-price environment that has emboldened governments to rewrite deals or nationalize assets.

“There has to be some discipline for governments,” he said.

“In our case, we are willing and have entered into a lot of discussions with host countries around mutually agreeing how to change deals,” he said.

But when the changes are unilateral, he said Exxon Mobil would rather move on. Cost overruns remain a major risk for oilsands projects, which are hard to build and then hard to operate.

Mr. Tillerson said he doesn’t intend to increase ExxonMobil’s position in the oilsands business — either through acquisitions in the oilsands or by privatizing Imperial Oil Ltd., of which it already owns 69.6%.

Royal Dutch Shell PLC took that step last year, when it privatized Shell Canada Ltd. so it could increase its oilsands exposure.

“We are quite happy with our holdings,” Mr. Tillerson said. “We are happy with the performance of Imperial.”

Exxon Mobil is already exposed to the oilsands through its control of Imperial, which in turn has a 25% stake in the Syncrude oilsands mining project and a 100% ownership of the Cold Lake thermal project.

It also jointly owns with Imperial the Kearl Lake project, now under development. and its sister non-profit websites,,,,,, and are owned by John Donovan. There is also a Wikipedia feature.

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